Fed focused on American jobs differently this time

WASHINGTON/SAN FRANCISCO — Eight years ago this month Jerome Powell, still in his rookie year as a Federal Reserve governor, surveyed the U.S. job market and declared it was good enough for the central bank to reduce the support for the economy it had rolled out to fight the 2007 to 2009 financial crisis.

The unemployment rate had just hit a post-crisis low of roughly 7.5 per cent. But for Blacks it remained a catastrophic 13 per cent, a fact not raised by Powell or any other policymaker during their meeting.

“We’ve achieved substantial progress towards our economic objectives,” Powell told his colleagues according to transcripts of that April 30-May 1, 2013, Federal Open Market Committee meeting. He encouraged them to reduce the Fed’s monthly bond buying at “the next plausible opportunity.”

The “taper” from that earlier crisis began later in 2013.

The Fed is again confronting a similar debate with Powell now its chair — singing a markedly different tune. The shift in his language on the matter now shows how fully the central bank has switched gears to emphasize maximum employment as the paramount of its two congressionally mandated goals.

Though markers like unemployment insurance claims and labour force participation are, because of the pandemic, worse today than they were when the Fed started withdrawing crisis support the last time, some broad indexes of labour market health are in fact better now than they were then.

Yet Powell, who speaks of the homeless people he sees on his commute as a measure of his job performance, says he is nowhere near ready to pull back on the throttle. In fact, he cringes at labour market data like the current Black unemployment rate of 9.6 per cent, which is far better than when he was ready to tighten policy after the last crisis.