Economy is recovering, but concern remains over lingering challenges for lower-paid workers, Fed chair reports

The economy is coming back after the financial impact of the coronavirus crisis, but those holding lower-paying jobs – and particularly Black and Hispanic prime-age workers – continue to have problems finding work, the chair of the nation’s central bank said Monday.

In remarks via webcast to the National Community Reinvestment Coalition (NCRC) in Washington, D.C., Federal Reserve Board Chair Jerome H. (“Jay”) Powell said that almost 20% of workers in in the lowest earnings quartile in February of last year were not employed by February 2021. That’s compared to 6% of workers in the highest quartile.

“The Fed’s latest Survey of Household Economics and Decisionmaking – or SHED report – which will be published later this month, will show that, for prime-age adults without a bachelor’s degree, 20% saw layoffs in 2020 versus 12% for college-educated workers,” Powell said.

“And more than 20% of Black and Hispanic prime-age workers were laid off compared to 14% of white workers over the same period,” he added.

Powell also pointed to small businesses as lagging behind in the economic recovery from the pandemic. He said the Fed has found that 80% of small businesses surveyed reported a decline in revenue; two-thirds of those, he said, saw revenue drop 25%.

“A recent Federal Reserve special report looked specifically at the impact on businesses owned by people of color, who reported greater challenges,” Powell said. “For example, 67% of both Asian- and Black-owned firms and 63% of Hispanic-owned firms had to reduce their operations compared to 54% for their white counterparts.”

The Fed chair noted that the next SHED report will show that 22% of parents were either not working or working fewer hours because of disruptions to childcare or in-person schooling. He said that 36% of Black and 30% of Hispanic mothers were disproportionately affected. “In a similar vein, labor force participation declined around four percentage points for Black and Hispanic women compared to 1.6 percentage points for white women and about two percentage points for men overall,” he said.

The Fed Board leader said the agency is focused on those “long-standing disparities“ because “they weigh on the productive capacity of our economy. We will only reach our full potential when everyone can contribute to, and share in, the benefits of prosperity.”

Powell characterized the Fed’s supervisory approach to dealing with the disparities as “robust” and “critical to addressing racial discrimination, which can limit consumers’ ability to improve their economic circumstances, including through access to homeownership and education.” He noted that violations of the Fair Housing Act and the Equal Credit Opportunity Act, which the Fed enforces, and that prohibit discrimination in lending are taken into account during bank evaluations under the Community Reinvestment Act (CRA), the anti-redlining law.

“The economic landscape has changed, and efforts to provide access and credit to communities must change with it,” Powell said. “Last year, the Fed issued a proposal for a strengthened, modernized CRA framework, with the objective of building broad support among both external stakeholders and participating agencies. Our goal is to strengthen the core purpose of meeting the credit needs of low- and moderate-income communities.”

Fed Chair Jerome H. Powell: Community Development