Topline
Though the Federal Reserve’s accommodative monetary policy and massive fiscal stimulus have ushered in a swift resurgence for stocks, customer-facing firms and their employees are facing a more-precarious recovery that will require state-and-local coordination in addition to expected government relief, Eric Rosengren, the Federal Reserve Bank of Boston’s president, said in a speech Friday.
Eric Rosengren, president and chief executive officer of the Federal Reserve Bank of Boston, speaks … [+]
Key Facts
Speaking to policymakers at a Yale University seminar, Rosengren said low interest rates, Fed asset buybacks and “forceful” fiscal stimulus measures should allow a robust economic recovery to be underway by the second half of this year–if vaccination efforts pan out as expected.
That will only follow a “potentially difficult road ahead over the next few months,” the Fed President says, pointing to mobility data that shows visits to grocery stores, restaurants and nonessential retail stores have dramatically scaled back since the summer following a second wave of domestic Covid-19 infections.
Fewer visits have led to decreased spending, forcing sharp employment fluctuations in industries most affected by social distancing–including those with the biggest employment declines since September: arts, entertainment and recreation.
These industries, which employ many low-wage workers, are “suffering a substantial shock” that’s disproportionately impacting Hispanics, Black Americans, women and younger workers, the Fed president said.
Rosengren says an equitable economic recovery will require broadening access to affordable health insurance, job training and investing in features that raise job quality for essential workers, such as childcare, eldercare and sick leave–all of which could bolster waning labor force participation.
He further notes concentrating recovery efforts at the state-and-local levels could help prevent a labor market recovery that’s more difficult than in previous recessions given that the nearly 3 million workers still temporarily laid off largely draw from small businesses, whose reopenings remain uncertain and subject to local restrictions.
Crucial Quote
“The uneven nature of this downturn has highlighted the need to rebuild the economy in a more inclusive way, and it isn’t enough for policymakers to focus on the macroeconomic response to the pandemic,” Rosengren said Friday. “The pandemic has shown the importance of finding ways to make work and life better for low-income workers… Absent such an effort, many individuals will continue to be held back from participating in the labor market, with negative repercussions for the economy as a whole.”
Tangent
The unemployment rate among Hispanics has fallen by 7 percentage points since February 2020, compared to 5 percentage points for Black Americans and roughly 3 percentage points for White Americans, Rosengren noted Friday, citing data from the Bureau of Labor Statistics.
Surprising Fact
The labor force participation rate plunged by about 3 percentage points after the pandemic forced shutdowns in March, and though it’s since creeped back up about 1 percentage point, it remains at a nearly 45-year low.
What To Watch For
In a note to clients Friday, Bank of America analysts said rapidly accelerating vaccination rates and loosening restrictions could mean a broad economic reopening happens as soon as the second quarter–much sooner than original forecasts calling for a reopening in the second half of the year. The analysts now believe herd immunity can be reached domestically in the fourth quarter.
Further Reading
New Unemployment Claims Hit 861,000 Last Week—Worse Than Economists Expected (Forbes)
10.1 Million Americans Are Still Unemployed As Rate Ticks Down To 6.3% (Forbes)
With Some Unemployed Workers Facing Surprise Tax Bills, States Start Providing Relief (Forbes)
