WASHINGTON–The Federal Reserve has released a new report, “Fed Listens: Perspectives from the Public,” which summarizes the 15 Fed Listens events held by Federal Reserve Banks since the beginning of 2019.
The most recent event discussed the effects of the COVID-19 pandemic.
According to the Fed, during the events federal Reserve officials directly engaged a range of individuals and groups—including unions, small businesses, low- and moderate-income communities, retirees, and others—on issues pertaining to the Federal Reserve's dual mandate of maximum employment and stable prices.
“In 2019, the Federal Reserve launched—for the first time—a review of the monetary policy strategy, tools, and communication practices we use to pursue our congressionally mandated goals of maximum employment and price stability,” the Fed said in releasing its new report. “Reviews like ours are part of good institutional practice, providing an opportunity to take a step back and ask whether we could be doing our job more effectively . A central part of our review was Fed Listens…”
The Fed noted the Fed Listens series concluded before the coronavirus (COVID-19) outbreak—with the exception of the recent virtual event—at a time when the economy was booming.
The Takeaways
According to the Fed, the “takeaways” from the events include:
- Individuals representing underserved communities generally saw reports of a tight labor market in 2019 as not representative of their own communities, where unemployment rates were still high. More pointedly, some participants questioned the characterization of labor market conditions as “hot” in light of the still high unemployment in their communities, the Fed reported. One person commented his community is “always in recession.”
- Many participants expressed concern about what would happen to the newly hired in their communities during the next downturn, commenting that these workers would be the first to lose jobs without having had the chance to develop adequate work experience. Participants also frequently mentioned childcare and transportation as critical for sustaining employment, but generally inadequate in lower-income communities.
- Small business owners and representatives from organizations of small businesses and manufacturing firms (National Federation of Independent Business and National Association of Manufacturers, respectively) saw the tight labor market conditions as presenting difficulties in terms of finding qualified workers to fill available positions. Some strategies for bringing workers into the labor force entailed modification of requirements for education or training.
- By and large, business participants did not report raising wages as a means of attracting and retaining workers in what they saw as tight labor markets. Instead, these participants frequently reported having to absorb increased costs associated with training programs, health care, or other benefits, the Fed said.
- When asked about the effects of changes in interest rates, participants representing underserved populations said the question was not applicable to most members of their communities, because many have limited or no access to conventional credit . Populations in lower- and middle-income communities have traditionally been more susceptible to predatory lending; those with poor credit histories have been precluded from taking advantage of low interest rates, the Fed said, adding, “While businesses and CDFIs generally found the low interest rate environment beneficial, representatives of retirees conveyed a more negative view of low interest rates given the reliance of some of the members of their constituency on savings income.”
- There was less discussion at the Fed Listens events of inflation than there was of labor market conditions. Participants generally acknowledged that inflation was low and posed few challenges. Representatives of small businesses or business associations emphasized the importance of low, stable, and predictable inflation for planning and decision-making. Participants representing the retired or those living on fixed incomes mentioned health-care costs in the context of inflation.
- When discussion turned to the possibility that the Fed might want to nudge inflation higher— which occurred at a few of the events—participants generally had little understanding for why policymakers would be concerned about inflation running below the Federal Reserve’s 2% objective.
- At most of the events, participants were offered the opportunity to comment on Federal Reserve communications with the public. While they expressed appreciation for the institution’s willingness to engage with the public during the review process, participants generally thought the Fed should do more, and on a more regular basis, to reach people around the country. In this regard, the work that community affairs and community development teams within the system do to address workforce development, education, and housing issues was acknowledged as important and valuable, the Fed said.
For the full report: https://www.federalreserve.gov/publicateions/files/fedlistens-report-20200612.pdf