“The Fed should consider targeting not the overall unemployment rate, but the Black rate,” Bernstein wrote in a recent policy brief co-authored with Janelle Jones from Groundwork Collaborative. They argue the black rate is a better gauge of how healthy the economy really is for all Americans.
The idea is gaining traction in progressive circles and has been shared with Biden’s policy team, several economists said. A spokesman for the Biden campaign declined to comment.
Congress has given the Fed two explicit goals: to get the nation to full employment and to keep prices stable by ensuring inflation doesn’t spike. Full employment has been a fuzzy goal post over time. Fed officials say they look at a wide variety of metrics to assess the labor market’s health, but minutes from their meetings reveal they rarely mention the black unemployment rate when they make key policy decisions to stimulate or tap the breaks on the economy.
Bernstein says Congress should tweak the Fed’s mandate, so the central bank has to “talk about unemployment, inflation and racial economic gaps" when it makes decisions.
The coronavirus recession has hit black and Hispanic workers far harder than whites, and there is concern that policymakers at the Fed and in Congress could conclude prematurely that the economy is improving if they just focus on the overall unemployment rate, which is mostly indicative of how white workers are doing. In May, black unemployment rose to 16.8 percent, while white unemployment declined to 12.4 percent, for example.
“By far, the most important contribution the Fed can make to racial economic justice is to do everything within its power to ensure that the U.S. labor market spends far more time at full employment than has historically been the case,” said Jones, who is director of policy research at Groundwork Collaborative, a progressive think tank.
Some former Fed officials acknowledge the central bank has to do a better job of looking at how black and other workers traditionally left behind are doing. Paying attention to unemployment by race could have made the Fed more hesitant to start announcing it would ease economic stimulus efforts in 2013, when black unemployment was still over 13 percent.
“If the Fed were to pay attention on a systematic basis to black unemployment, it might make them more cautious about raising rates,” said Narayana Kocherlakota, former head of the Minneapolis Fed from 2009 to 2015. He added, "It would make a difference in Fed policymaking if you had more African Americans in top roles.”
Analysts at the Economic Policy Institute and the Center for Popular Democracy have also backed the push for the Fed to look more closely at black unemployment.
Others argue the central bank is already tasked with too many issues to worry about, and Congress’ tools and policies, not the Fed’s, are better suited to address high black unemployment and long-running racial disparities.
“The private sector hires and fires people. The only thing the Fed can do is encourage businesses to borrow," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It’s not clear how this is part of the Fed’s mandate.”
Boockvar worries that adding a black unemployment target to the Fed’s mandate would politicize the central bank in a way Fed leaders have been trying to avoid for decades.
Other economists point out that Fed Chair Jerome H. Powell, the central bank’s top leader since early 2018, has been more focused on ensuring the job gains reach “more of those still left behind” than many of his predecessors. Black unemployment fell to its lowest level on record during Powell’s tenure.
But the pandemic has wiped out roughly a decade of job gains and sent unemployment to the highest levels since the Depression era. Powell has been clear he is concerned about how the pandemic is affecting minority and low-income communities.
“The pandemic is falling on those least able to bear its burdens. It is a great increaser of inequality,” Powell said last month.
Powell has signaled he is unlikely to raise interest rates for a long time since there’s little concern about inflation spiking and harming the economy. But his tenure as chair is set to end in early 2022 when an uneven recovery could be underway that once again sees white workers and college graduates, who are also predominantly white, benefiting far more than other parts of the economy.
“The issue is it takes time for recoveries to trickle down to the lower-skilled and traditionally marginalized groups like people of color. We saw that front and center in the recovery fro the Great Recession,” said Ernie Tedeschi, a former top economist at the U.S. Treasury. “It’s not that crazy of an idea to ask the Fed to target some measure of employment for more marginalized workers rather than the average for everyone.”