WASHINGTON – Federal Reserve Chairman Jerome Powell says the economic outlook has “clearly brightened” in the United States but the recovery remains too uneven with lower income groups lagging behind.
In a speech Monday, Powell cited a number of reasons that U.S. growth prospects have brightened.
“We are not out of the woods yet, but I am glad to say that we are now making real progress,” Powell said in remarks to the National Community Reinvestment Coalition, citing rising vaccination levels, increased government support and more business re-openings across the country.
But he said, “The economic downturn has not fallen evenly on all Americans and those least able to bear the burden have been the hardest hit.”
Powell said new statistics showed that 20% of workers in the lowest one-fifth of workers by income did not have jobs in February of this year, one year after the pandemic hit. He said that compared to 6% of workers in the highest one-fifth of incomes who were still without work.
Powell said data the Fed will release later this month will show that while 22% of all parents were either not working or working less because of child care and school disruptions during the pandemic, the proportion of Black mothers not working because of these reasons was a far higher 36% and it stood at 30% for Hispanic mothers.
For minority-owned small businesses, Powell said 67% of Asian- and Black-owned firms and 63% of Hispanic owned firms had to reduce their operations because of the pandemic compared to a smaller but still significant 54% of white-owned businesses.
Labor force participation had declined 4 percentage points for Black and Hispanic women compared to 1 percentage point for white women and about 2 percentage points for all men, he said.
Powell said the Fed was focused on these long-standing disparities because they weigh on the country's productive capacity.
“We will only reach our full potential when everyone can contribute to, and share in, the benefits of prosperity,” Powell said.
Powell repeated the Fed's pledge to use its power to control interest rates to keep rates at current ultra-low levels until it had achieved the goals of maximum employment and inflation rising for a time above the Fed's 2% target, a goal the Fed has failed to achieve for the past two decades.
“We view maximum employment as a broad and inclusive goal,” Powell said. “Those who have historically been left behind stand the best chance of prospering in a strong economy with plentiful job opportunities. Our recent history highlights both the benefits of a strong economy and the severe costs of a weak one.”
During a question and answer period, Powell was asked whether he believed creation of a digital currency could play a role in helping facilitate financial transactions for millions of Americans who do not have bank accounts.
Powell said about 7 million households — 5% of the population — did not have bank accounts, making it hard for them to get their payments through three rounds of support payments from the government which the IRS deposited directly in many bank accounts.
While the Fed is currently looking at the benefits and problems arising from digital currencies, Powell said he believed the best way to address the problem of the unbanked in this country was through a bigger push to make low-cost banking accounts more broadly available.