Millions to miss out on looming economic boom

A major reason the Federal Reserve insists Americans shouldn’t fret about the risk of runaway inflation boils down to a letter Alexia Figueroa received from the hotel she worked at for 15 years.

Figueroa was furloughed from her job as a restaurant hostess and server at the Kimpton Nine Zero Hotel in Boston last March, and she’s waited for the call to come back ever since. The job helped her family buy a house and provided health insurance for her two children.

Then last week, Figueroa learned that she and dozens of others had been fired.

“The recovery looks like it is coming soon, but when they sent me the letter saying I don’t have the job, it’s like they are keeping me away from the recovery,” Figueroa, 39, said. “To find another hospitality job is hard for me in this moment.”

By many accounts, the economy is projected to grow at its fastest pace in four decades this year, bolstered by President Joe Biden’s $1.9 trillion stimulus package and more widespread vaccinations. The rosier picture has economists debating whether such a forceful turnaround will overheat the economy and trigger cycles of inflation unseen for decades.

The Fed isn’t worried. Its explanation typically includes academic debates about what constitutes inflation or what the mathematical link is between unemployment and prices.

But the answer this time is also much simpler: Despite the headline numbers, the economy is still in bad shape for millions of Americans. And for many workers like Figueroa, jobs may not come back even if the economy booms again.

The bleak reality is coming into sharper focus as the Biden administration prepares to unveil an at least $3 trillion infrastructure and jobs package Wednesday, one that’s designed to confront global climate change and rebuild America’s roads, bridges and other infrastructure. The package could provide additional support to the economy in the years to come, but there are more imminent challenges, especially as coronavirus-cases rise again across the United States.

All the while, the scars of pandemic are far from healed.

The leisure and hospitality sector — which largely employs people of color and women — is down almost 3.5 million jobs, or roughly 20 percent of its pre-pandemic level. Workers who had been in the bottom 25 percent of earners faced an unemployment rate of around 22 percent in February, compared with the overall rate of 6.2 percent, according to a speech last week by Fed board member Lael Brainard.

Economists say many of the 9.5 million jobs still missing from the labor market will gradually return. But it’s unclear how long it will take, and which jobs will vanish forever in the meantime. Businesses are increasingly looking to technology and automation to cut the cost of labor, compounding the risks of long-term unemployment for some of the country’s most vulnerable workers.

The bleak picture shows the darker side of the Fed’s plan to keep interest rates near zero for quite awhile. Historically, the Fed raised rates and slowed the economy to keep inflation from creeping too high, even at the cost of higher unemployment.

Now the Fed goes by a new playbook, one that tolerates higher inflation if that means more people can get a job.

But if all of that growth leaves behind people like Figueroa, the Fed’s path to getting as many people back to work as possible will be even harder to forge.

“Although the outlook has brightened considerably, the fog of uncertainty associated with the virus has yet to lift completely, and current employment and inflation outcomes remain far from our goals,” Brainard said last week.

Federal Reserve Chairman Jerome Powell has long said that getting the pandemic under control is the best way to heal the economy. Vaccinations help people return to jobs that depend on person-to-person contact, Powell says. As people spend money on longawaited vacations and entertainment, hotels and concert venues will be able to bring workers back on the payroll, for example.

But some jobs may never return. In her speech, Brainard cited a December survey that found roughly half of chief financial officers from large firms and about one-third of those from small firms, said they were “using, or planning to use, automation or technology to reduce reliance on labor.”