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Thursday, July 16, 2015

'The Fed and African-American Unemployment'

Jared Bernstein comments on Janet Yellen's assertion that the Fed is powerless to do anything about the fact that "black unemployment has averaged almost twice that of overall unemployment":

The Fed and African-American Unemployment: ...black unemployment tends to be twice that of the overall rate, and more than twice the white rate. Moreover, this level difference translates into change differences such that a one percentage point decline in overall unemployment often leads to a two point decline for blacks. See here for more details, e.g., “black unemployment has averaged almost twice that of overall unemployment since the monthly data begin in 1972 (average: 1.9, with standard deviation of 0.15, so not a ton of variation around that mean).”
In that sense, the Fed has the potential to make a huge structural difference in the economic lives of blacks and other minorities by heavily weighting the full employment part of the their mandate relative to the inflation part, especially since there’s still considerable slack in the job market, with lower-wage, minority workers facing the brunt of it, and—importantly—little evidence of inflationary pressure (if anything, the Fed has missed their inflation target on the low side for a few years running now). ...
Chair Yellen well knows this 2:1 problem, and I take her comments to mean that there’s not much the Fed can do to change it... However, economist Bill Spriggs, who knows a lot about this, argues ... that ... at full employment, employers cannot afford to discriminate against minorities the same way they can in slack markets.
And what Bill will tell you is that this phenomenon has the potential to reduce that 2:1 ratio, which would be a tremendously beneficial structural advance.

    Posted by on Thursday, July 16, 2015 at 09:23 AM in Economics, Unemployment | Permalink  Comments (97)


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