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Transcript: The Path Forward: Economic Mobility with Raphael W. Bostic

MS. LONG: Welcome to Washington Post Live. I’m Heather Long, an economics correspondent at The Post. Today we are going to be talking about the state of the U.S. economy and how America can ensure a speedy and more equitable recovery this time around. I am joined in this discussion today by Raphael Bostic. Dr. Bostic is a Ph.D. economist and currently president and CEO of the Federal Reserve Bank of Atlanta.

Welcome to Post Live, Raphael.

DR. BOSTIC: Thank you, Heather. It's really good to see you.

MS. LONG: You too. So, let's start with a really seemingly basic question but it's kind of tricky, and that is, is the U.S. economy still in a recession right now?

DR. BOSTIC: Well, Heather, you said the right word, and that is "tricky." If you look at the aggregate numbers, coming off of the really tough spring that we had when we shut down the economy in response to the public health crisis, we lost a ton of jobs and GDP really stopped. But what's happened since then is that GDP has really grown pretty steadily from those times, and employment has as well. So, if you look at the aggregate number, you get a picture that says we're doing all right, and by most recessionary measures you would say we're probably emerging from it, if we're not already out of it.

But what that does is it really masks a reality, which is that there are really two recoveries going on. One is robust and strong, for people who have jobs where they can work from home and they don't necessarily have to be disrupted by some of the responses on the public health side, and then the other, where you do have people that are faced with such difficulties and problems, that recovery has not, in some regards, not even really begun, and those people who are in those sectors and in those communities, they are continuing to struggle and they're feeling particularly precarious. And that's something that we have to make sure we remind ourselves of, even as the aggregate numbers look better.

MS. LONG: Yeah. And I know you've been very focused on that, who is getting left behind in this economy and recovery. I want to ask you about long-term scarring. Every time I talk to an economist, they say what we really need to be worried about right now, one is the long-term scarring that's going to last, even after we get, hopefully, these vaccines out in the summer, by the fall. So, I'm curious to hear, what's your top concern or top one or two concerns about what could that lasting scarring be from this recession?

DR. BOSTIC: Well, there are really two types of scars that I'm really concerned about. One is on the business side, and it's really focused on the many small businesses in this country that form the backbone for so many commercial zones in so many communities. Many small businesses don't have the same sorts of financial resources that a Fortune 500 company has or a company that's listed on a stock exchange, so they are much more precariously positioned, and this kind of deep shock could potentially put them out of business altogether.

So, I really worry about that, particularly because pre-pandemic these were viable businesses, the shock is not due--and their hardship is not due to anything that they've done. It would really be a shame if we lost them.

And then the second is really much more around labor force participation, and I worry that the developments of the pandemic are changing the dynamic in ways that are going to cause a lot of people to exit the labor market, if not completely, to a large extent. So, I think about women in many families who have already left to do child care. I think about workers in a number of the service sectors, like restaurants or hotels, who have now been out of work, some of them nine months, which is an extremely long time to be separated. And I think about workers in communities that have a lot of lower-income and minority people in it as well. The virus hit that sector so much harder that the distress is really significant there, and there is a risk that they just fall so far behind that they lose hope and then choose not to participate in the labor market.

MS. LONG: Yeah. And given what you're saying, I've heard you make the comment a lot, and I believe you made it on PBS News Hour over the weekend, to err on the side of being more supportive, that policymakers like you and others at the federal level really need to do more, not less, right now in this crisis.

I guess given that, are you supportive of another big relief package from Congress? Is that what's needed right now?

DR. BOSTIC: Well, let me explain exactly my view on this. Pre-pandemic, we had many people who were working. We had record levels of employment. We had businesses whose models were working. And then we had an outside shock that really disrupted all of that. And for me, the idea behind relief is to try to minimize the extent to which that shock leaves people and businesses unable to really pick up where they left off right when the pandemic hit. So, to the extent that we have relief that can be deployed in ways that make that happen, we should definitely do that, in my view.

Now I would also say that--and this is what makes it hard--we've not really had a long experience with these sort of global pandemics and how they ripple through economies and how families and businesses respond in that regard. So, to me, I think one of the most important things that we do is not wave the flag of success too soon. There's still a lot of precariousness. There's still a lot of uncertainty about how things are going to move forward.

So, I think that we need to make sure that the relief is going to be there through that entire uncertain period, because if we do that, that increases the likelihood that as many people as possible, that everyone will be in a place where they can pick back up and our economy can start to run strongly again.

MS. LONG: Yeah. If I'm hearing you correctly, it sounds like you would favor some more relief. I know you don't like to prescribe exactly what Congress should do, line by line, but it sounds like you think more could be merited?

DR. BOSTIC: Well, in my view I think we need to make sure that there is relief through the entire experience of the pandemic. And, you know, Neel Kashkari, my colleague from Minneapolis, penned an op-ed that was in The Washington Post not too long ago, which said basically the same thing. We need to make sure that as long as there's distress associated with this public health crisis, there needs to be relief that accompanies that. And so, I think we need to be thinking hard how long we think this is going to go, and then make sure whatever relief package that we are going to have in place, and whatever the details are, it lasts through that duration so that we don't lose people that fall through the cracks because the distress continues and the relief ends.

MS. LONG: Yeah. Let me ask in a different way, stepping away from the fiscal policy side. Do you think GDP will rebound this year, and what's your thinking on employment, like when we could potentially be back to close to full employment? A lot of people were watching that Congressional Budget Office forecast that came out recently. They thought that GDP would rebound this year, maybe by the middle of the year, but then it could take another maybe two years or three years to get employment back to somewhere that we'd all like to see. How do you think about that?

DR. BOSTIC: Well, if you look at the aggregate numbers, what you see is that after the dip, GDP has recovered in a faster way than employment has. And if you just extrapolated those trends, my analysts are suggesting that we could see GDP back to pre-pandemic levels sometime by the fourth quarter of this year.

But the other reality is that employment itself is rebounding at a much slower pace, and this is something that I hear from business contacts across the Southeast, my district. When I talk to them, they say, "You know, sales are coming back pretty good, our revenues are starting to be in a solid place and on a positive trajectory, but I'm going to be reluctant to hire people because there's still a bit of uncertainty about how this is really going to play, and there may be some choppiness." And so, what we're seeing in our district is exactly the same thing that you're seeing at the national level, where the revenues or the GDP is coming back strong but there's a reluctance, because of a lot of uncertainty, to do the hiring that would have that go at the same pace.

So, it's going to take a while, I think, longer than the end of this year, for us to get employment back to a level close to pre-pandemic, and that's something that we watch very closely, because as you know, employment is one of our mandates.

MS. LONG: Mm-hmm. I think you surprised quite a few people when you suggested last week the Fed may need to raise interest rates as soon as 2022. Can you expand a little bit more on why you think that might be necessary?

DR. BOSTIC: Well, I don't think I said exactly that, but what I did say is that there are many different possible trajectories for the economy, and there are some scenarios that could play out in the next 18 to 24 months which could be very positive for the broader economy, and, indeed, even including the people who have been left behind. I think you guys have reported, and many others have, that the relief is allowing families to be much more stable and secure in terms of their financial situation, so they would be prepared to jump into the economy in a very robust way once the vaccine gets through the population. I've heard from many, many businesses.

We actually did a survey that was released last week on small businesses, where they've told us that the PPP, the Paycheck Protection Program, has been extremely helpful for them is putting them in a more solid footing that could allow the economy to jump back much stronger than some of the models are.

But I would emphasize that that's not my modal outcome right now. Right now, it's for a steady and slow progress. Certainly, the summertime will be stronger than it is right now. But there is so much uncertainty, and I just want everyone to understand that there are some signs of positivity out there, and we're going to pay attention to that and make sure that our policy decisions are data driven.

MS. LONG: Yeah. One of those signs of somewhat positivity in some people's minds may be potentially rising inflation. There's obviously been a debate about whether that will happen and to what degree. Do you have concern that inflation could really take off in the next year or two?

DR. BOSTIC: Well, Heather, I'll tell you, we're having the same debates in our building about exactly that question. But what I will tell you is right now the evidence tells me that I shouldn't be worrying about that too much. And one of the things we learned coming out of the Great Recession is that inflation and the price level has responded much less sensitively to tightness in labor markets, to very low unemployment rates than we've seen historically. And there are a lot of potential reasons for that, and there's a host of academics that are doing research on this to try to nail down exactly the precise parameters that are driving that.

But that's a reality that I don't think has changed fundamentally. So, I'm really not expecting us to see a spike in inflation that is very robust in the next 12 months or so. But, as I just said, there's so much uncertainty. I'm not precluding it, but it's just not what I'm expecting right now.

MS. LONG: Fair enough. I know we all wish we had that crystal ball, but we don't.

DR. BOSTIC: Yes, we do.

MS. LONG: Another one I wanted to ask you about, Chair Powell's been making some interesting comments in the last few months. He's using this line, "We're recovering but to a different economy." And he talks about there's probably going to be a substantial number of workers who are going to need a lot of support, even after the pandemic ends, because the economy is going to change, he calls it "in fundamental ways," you know, this idea that maybe people won't travel as much, or people won't work downtown as much, or maybe automation will pick up. You can sort of tell the story in a lot of different ways.

But I'm wondering, I know you and I have a lot of concern about people who are in a precarious situation. Do you worry that a lot of low-wage jobs just aren't going to come back? I mean, a lot of these jobs in the service sector might not come back. Do people need to retrain? What's your thinking on how much change there could be in the types of jobs people do, coming out of this?

DR. BOSTIC: Well, I actually agree with Chair Powell on this. You know, one of the things that we've seen, in our reviews and engagement with people throughout the economy, is that a lot of the trends that have been talked about and written about, and thought pieces in the media, have all accelerated because of the pandemic. We've seen businesses, and I've seen businesses who have told me they have been thinking about doing automation investments, but have decided this is the time to do it. We've seen real changes in the willingness of businesses to leverage technology to deliver their services.

And an example I like to use is I talked to a person who runs a hospital and they said, "Before the pandemic only 3 percent of our visits were through telehealth, and now we're at about 33 people, about a third of them are now." And what that does is it changes the needs for that hospital system in their hospitals. So maybe the café isn't open for as long. Maybe you don't need as much coverage of the parking structures. So those sorts of things do have implications for the types of jobs that are going to be available and how people are going to stay employed.

So, we, in Atlanta, have been thinking about this for a while. We have a Center for Workforce and Economic Opportunity, which is focused exactly on this question of how do we get people who have jobs that are starting to disappear as the economy evolves in a structural way, and get them reskilled so that they become competitive for the jobs that are emerging because of that structural transformation? It's going to take a lot. There's a lot of infrastructure investment that's going to be needed. In the training sector, there's going to be a new type of conversation that we're going to have to have with employers so that they can tell us the types of things they're going to need in the future. And then we're actually going to have to educate the working public as well, so they understand that there is change that's going to be needed, but that there's going to be an infrastructure that's around to help them get that change and get that next job.

MS. LONG: Yeah. That's incredibly important. I'm glad to hear you all are working hard on that.

I want to throw your way, whenever I say I'm interviewing a Fed governor, the number one question that readers submit is about inequality. And what I mean by that is a lot of people do believe that the Fed's low interest rates and very stimulative monetary policy have contributed to inequality, and now they point to that research paper that may have seen, the New York Fed published, I believe, last week, that indicated that those low rates, while they have helped more people find jobs, keep the economy going, the real benefit has been to boost asset prices, particularly stocks, which overwhelmingly benefit the wealthy and make the rich richer.

And I'm wondering how you respond to that and how you think through the notion that some of these monetary decisions you're making are playing a role in inequality.

DR. BOSTIC: Well, Heather, I would say that our policies ripple through the economy in a complex set of ways. And what we've seen historically in this country are disparities that happen in terms of employment, that happen in terms of wages, and then also that happen in terms of wealth accumulation. I think a lot of the emphasis has been on that wealth part, but, you know, where I am is you're not going to build wealth if you don't have a job. You're not going to build wealth if you don't have fair wages and get paid for the value that you're providing.

And so, we're actually trying to hit certainly those two at least as much as the basic foundation of financial markets and their assets. And I would say that I think our policies--and you saw this leading up to the pandemic--we're starting to narrow those employment gap differentials that we see on a race basis. And so, I actually think that we've got to not basically throw stones at part of the story without acknowledging the other parts of the story, and I think we're making progress on that.

And then the other thing I would say is that our policies go beyond just monetary policies, and the way that we engage to try to address some of these disparities and some of these inequalities are in ways that are not directly or exclusively associated with our monetary policy decisions. And those, in some regards, can be just as important as a monetary policy decision in trying to create a structure that narrows those gaps so that then maybe wealth does become the predominant consideration or concern that we should have.

MS. LONG: And can you just say a little bit more about what those other policies--everyone always thinks of interest rates right away at the Fed, but what are some of those other areas? Are you speaking about bank regulation or kind of what else are you talking about?

DR. BOSTIC: Yeah. So, you know, we do bank regulation, and right now, for example, we have a proposed regulation out for comment around the Community Reinvestment Act, which is really asking for input on what are the ways that banks should be investing or deploying their capital in communities to help them be more productive and to help the people that live in those communities have better access to opportunity. And through regulation and legislation like that, we can be a vehicle to help position the infrastructure in communities much better.

We also have a community and economic development function that is pretty robust through the system, and in those instances what we do is we go out and we partner with leaders at the local level, at the county level, and at the state level to help them grapple with the challenges that they see that are holding back their communities and their residents from moving ahead. So, we do small business engagement and advice, we connect them up with experts in, say, education or in public safety, or we really try to advance those things.

The other thing I would say, and, you know, this is a bold plug, we do things like the Racism and the Economy series, where we bring together people who have very interesting ideas about ways to move forward, and we try to create a thoughtful platform that can inspire people to make positive change in their policies and how things happen.

So, there are lots of ways that we try to be out front on these issues and really drive to action and change, and that's something that I think is noteworthy, and it's something that I'm really excited that we're going to continue to lean into in a very strong way, to see that change actually happen.

MS. LONG: Yeah. You and I spoke over the summer about there's been a push to see if the Fed should be looking at different metrics or more focused on different populations or on some of these inequality questions. And at the time you said you were doing--I love this phrase--"soul searching," about whether the Fed should look at certain statistics or expand its metrics. There was a push at the time to maybe have the Fed focus more on the Black unemployment rates, since that's usually one of the last rates to fall as we are in a recovery.

So, I wanted to check back. Have you come to any more decisive thoughts about what the Fed should do differently as it really looks to rethink what needs to be done to get to a more equal economy?

DR. BOSTIC: Well, first of all, I continue to think on this, and this is something that I'm always open to having discussion and dialogue on. But I would say that I think you've seen some of the byproduct of this in our long-run monetary policy framework, where we explicitly call out the idea that we think about employment more inclusively, which means all segments of the economy. And we also really voice an idea that we're going to not have an aggressive approach to extremely low employment unless we see inflation that seems to be spiraling out of control. So, if we go lower for longer, that has, as a byproduct, the outcome that employment for African Americans, for Latinos, and others, will go a lot lower than it would have historically.

So, I think you've seen us move already, and my view is, and my approach is going to be, to continue to stay focused on that. In my district we have lots of communities that have not historically benefitted as much, and one of the good byproducts of the pandemic has been it's really given us an opportunity to really jump in and deeply understand them and build connections that I think are going to help us stay very, very aware of what's happening there. I'll bring that to the FOMC table, and will do all I can to make sure that that affects policy.

MS. LONG: Yeah. Let me ask you about staffing. There was a New York Times report in recent days that looked at how few Black economists there are employed across the Federal Reserve. Obviously, you are held up as a prime example of what can be done and what needs to be done. But at the Atlanta Fed, The New York Times pointed out that other than you there's only one Ph.D. Black economist and I believe one Ph.D. Hispanic economist. What are you doing to build those numbers up?

DR. BOSTIC: Well, we are doing extensive outreach to try to improve the diversity of our staff. You know, this is happening in multiple dimensions. So, one, we are actually building connections with our local institutions, many of whom have many African Americans who I think have the potential to be really strong economists but maybe haven't gotten the same amount of support and encouragement that they have otherwise.

So, for this month of January, I actually was in the archives doing research, and we had some students from Spelman who joined us, because we're trying to expose them to research, and give them a sense of that. I've got staff that are teaching in colleges around the district, to try to make that point. And we are continually exploring and trying to broaden the set of research assistants and others who might participate.

But then more broadly, I think we have a fundamental challenge in terms of just the pipeline. There aren't enough African Americans who look at economics and finance as a tool. And so, I really challenged our team to try to effect that pipeline at the very earliest stages. So, we're building curricula that is intended to be deployed at the grade school level, at fifth grade, and at eighth grade, so that students, as they are growing up, are getting positive signals that they have talent in this area, and in many instances, I don't think they have been getting those signals nearly as clear as they might. And my hope is that with that kind of stuff happening, we will start to see pools of smart, young African Americans who jump into this field, because the field needs it. Those diverse voices will allow us to have a different understanding, and a richer understanding about the challenges that people face and the decisions, and why they make the decisions that they do.

MS. LONG: Yeah. Wow, starting in third grade. I like that, for some economics. Maybe a little earlier.

We only have a couple of minutes left. I want to get your views on the GameStop stock phenomenon. Obviously, it captivated the nation. I know you don't have maybe a particular role to say on exactly what went on, but I'm wondering big picture, when you saw this happen, does this signal anything to you about markets or potential bubbles or what the psyche of the nation is right now, financially?

DR. BOSTIC: Well, I'm not going to comment directly on GameStop, but what I will say is that our financial markets have evolved tremendously over the last 25 years. You know, I remember when I was growing up if I wanted to cash a check or if I wanted to deposit it, I actually had to go to a branch and hand it to someone with the signature on the back. That doesn't happen anymore. You just take a picture and then that happens. You think about all the financial technological institutions, the fintechs out there that are providing access and changing how transactions happen, and so much of that happens in Atlanta so I've become very sensitive to this.

The question I have in my mind, and this is something that I think the GameStop experience has exposed, is whether regulation has really advanced and evolved as the markets have. And I think that in this instance, this is going to be a question that the FCC has to face, but it's a question that we continually have to be asking ourselves as new tools and new devices are introduced. You know, is our regulatory structure really equipped to accommodate that and still make sure that our financial markets and our financial system operates in a safe, sound, and resilient way?

So, it's going to be an interesting future, and I have no idea how this is going to turn out, but I think this is the right question for us to be focusing on.

MS. LONG: It sounds like maybe you weren't on those Reddit threads.

Lastly, I just want to ask you, you know, but on a serious concern, there are concerns that some people have about how pricey the stock market is, and from more of a financial stability standpoint, which is the Fed's remit, do you see any signs of bubbles or any signs of financial stability concerns right now?

DR. BOSTIC: So, I definitely worry about financial stability, and it's one reason why I spend a lot of time talking to the banks in my district, to understand whether there are risks that are evolving and what the position is of the banking institution and the financial sector, more broadly.

What I am not seeing right now, a froth that would suggest that we are at risk from a financial stability perspective. You know, the asset markets have moved, in part because some of the largest companies have been extremely successful. So, you take an Amazon, they're doing extremely well.

But this is something that we continually watch. If you talk to any banker that I engage with or connect with, I ask them, "Are there things you're worrying about? How is your concentration and exposure in particular markets, and what kind of capital are you holding to make sure that if something bad happens, you're going to be in a resilient position?" Right now, all the signs suggest that that's happening.

But I will say one other thing, and this is one thing that I'm going to try to lean into more. There is a lot of what happens in financial markets now that is outside of the banking sector, that's moved to non-bank type entities. We need to have a clearer sightline into the types of risks that they are bearing and taking on so that we have a complete picture. And that's something that I hope evolves with data reporting and other tools that are at our disposal.

MS. LONG: Yeah. Lastly, have you been vaccinated yet?

DR. BOSTIC: I have not been vaccinated yet. I will tell you, my staff has. There are members of my staff that come into this building every day, and they have gotten--I was talking with one of my law enforcement officers just this morning. He got his second shot yesterday. He is doing well. What I decided, for me, was I didn't want to jump the line on people who come and put themselves potentially at risk all the time. Now, I'll be at the beginning, or toward the beginning of that next set of essential workers at our bank, but I don't--I have cash people who come in every day, I have law enforcement who come in every day. They should go first, and that's what I'm committed to.

MS. LONG: That sounds very reasonable. Thank you for your time, Raphael. It is always a pleasure to see you.

DR. BOSTIC: Heather, I always enjoy it. I look forward to the next time.

MS. LONG: Same. Thank you to our viewers for tuning in to Washington Post Live. We've got an exciting week the rest of the week. You can join us tomorrow at 9:00 a.m. for First Look, as we delve into the upcoming impeachment trial and make sense of what's going to happen and what it all means. Thank you.

[End recorded session.]