Do Black Lives Matter to the Federal Reserve?

Center for Popular Democracy

A Fed Up rally in San Francisco on March 5, 2015. 

This week, Dawn O’Neal has traveled from her home in south DeKalb County, Georgia, to the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, with a simple message for Fed leaders: Don’t raise interest rates. The 48-year-old teacher’s assistant and mother of four wants Fed governors to know that her community is far from recovered and that raising interest rates too soon could be disastrous.  

O’Neal is one of dozens of activists and policy experts traveling to Jackson Hole this week to urge the Fed against raising rates. The campaign, called Fed Up, includes some two-dozen unions, community groups, and think tanks, from the AFL-CIO to the Working Families Party. In Jackson Hole, organizers will deliver a petition demanding that the Fed rethink its plan to raise interest rates until the recovery can reach more Americans. Fed Up also plans to hold a series of teach-ins exploring questions like “How Do We Build a Fed that Works for Us?” and “Do Black Lives Matter to the Federal Reserve?”

While there’s only so much the Fed can do when spending on public investments and social programs is well below where it should be, the absence of fiscal support makes monetary policy that much more critical to promote a broadly shared recovery. At its core, the Fed Up campaign is about answering two questions, said Ady Barkan of the Center for Popular Democracy during a press call previewing the upcoming meeting: “Whose recovery is this?” and “Whose Federal Reserve is this?”

“I don’t think that those at the Fed know how life is here in south DeKalb County when they say that the economy is recovering,” O’Neal said during the call. O’Neal makes $8.50 an hour at the daycare center she works at in Atlanta. That’s not enough, she says, to cover rent, food, and utilities for her household, let alone the medication she needs to treat asthma and high blood pressure. “Our life is a constant struggle,” she says. “We have to decide whether, you know, are we going to buy meat, or are we going to buy medicine, or are we going to pinch off the electric bill this month?”

But, she emphasized, she’s hardly alone. “It’s also my neighbor. It’s also the person down the hall, my neighbor next door, around the corner. The whole community is suffering.”

The Atlanta area has been particularly hard hit by the financial crisis and weak economic recovery. In 2009, the Pew Hispanic Center named Metro Atlanta one of a handful of “distinct epicenters” of the nationwide foreclosure crisis. According to their report, less than 300 U.S. counties had foreclosure rates of more than 1.8 percent, and 19 of those counties, including DeKalb, are in Metro Atlanta. As elsewhere, the crisis had a particularly severe impact on black communities: All of the 19 counties Pew singled out as centers of the crisis are majority-black.

Since then, the weak recovery has in some ways only worsened inequities like this. In 2011, the unemployment rate for blacks in the Atlanta area stood at 14.4 percent, or twice the rate of their white neighbors. Three years later, black unemployment had dropped to 13.7 percent, but because joblessness among whites in Atlanta had fallen much faster, blacks were now nearly three times as likely to be jobless as whites. Today, DeKalb County has a poverty rate of 19 percent, well above the average for Georgia and the nation as a whole. And most of that poverty has been concentrated on the county’s majority-black south side.

But among black communities nationwide, DeKalb has actually fared relatively well. The area was hit hard by the downturn, but it remains the second-most affluent black-majority county in the country. By contrast, in Washington, D.C., a majority-minority city, black unemployment is a staggering 15.8 percent, more than five times the rate for whites, according to the Economic Policy Institute. Nationwide, after hitting its highest levels since the 1980s, black unemployment remains about double the rate for whites. The mortgage crisis and subsequent downturn destroyed a full 47 percent of black families’ wealth, and that wealth is far from recovered.

Despite that, the Federal Reserve seems perilously close to raising interest rates, possibly as soon as next month—a change that could have a disastrous effect on the already-weak recovery.

“We shouldn’t mince words,” said Barkan. “When the Federal Reserve raises interest rates, it is doing so in order to slow the economy down in order to prevent the economy from creating more jobs.” A slowdown like that would not only make it harder for the labor market to recover, but it also has a good chance of widening the gap in unemployment between blacks and whites. Historically, the joblessness gap between black and white workers tends to grow when the economy slows down.

But Fed officials remain stubbornly committed to a rate hike, even as instability grips the stock market this week. In a speech on Monday, following another day of market volatility, Atlanta Fed President Dennis Lockhart sought to allay suspicion that the Fed’s plans to raise rates this year had changed. In June, 15 out of 17 senior Fed officials indicated that they’d like to see a rate hike this year, echoing a similar statement from March. As Lockhart put it in another speech on August 10, “The economy has made great gains and is approaching an acceptable normal.” Nowhere in his speech did Lockhart mention the poverty and racial inequality gripping communities just a few miles from the Atlanta Federal Reserve Bank he chairs.

For O’Neal, places like south DeKalb are very far from an acceptable normal. “When the Fed says that the economy is recovering and they want to raise the interest rates,” she said, “I look around and I don’t see recovery in my community.” 

Unfortunately, plenty of Fed leaders don’t seem to think an unequal recovery is their responsibility to address. In testimony before Congress last month, Fed Chair Janet Yellen said that while black unemployment remains very high, “there really isn’t anything directly the Federal Reserve can do to affect the structure of unemployment across groups.”

But Barkan begs to differ. “We think that’s really a mistake,” he said. “A strong economy—more job growth and more wage growth—has a disproportionately positive effect on African Americans because of the racial disparities that exist in our labor market.” Keeping interest rates low is far from the only solution to racial inequality in the job market (and not even the only thing the Fed can do by itself), but it’s a good start.

Josh Bivens of the Economic Policy Institute, another Fed Up signatory, agrees. Because low-wage workers and workers of color tend to feel changes in unemployment much more dramatically, he said, keeping unemployment low should be the Fed’s first priority. “A policy that lets the unemployment rate get as low as it can possibly go without sparking inflation is one that’s going to have disproportionate benefits to workers of color,” he added.

Unfortunately, Barkan said, Fed officials have a long history of overlooking issues like racial gaps in unemployment and wealth. A big part of the problem is the central bank’s leadership, which is heavily skewed toward the banking sector. By law, 72 out of 108 directors of the Fed’s 12 regional banks must represent workers. But currently, just two officially do, compared with 91 who come directly from banks and financial institutions. “Of course when you have leadership like that you get policies that don’t advance the needs of American working families,” Barkan said.

Which is exactly why Fed Up plans to confront the central bank’s leadership today in Jackson Hole. In doing so, the coalition will help connect monetary policy and policymakers to the people and communities it most impacts.

And demanding that interest rates stay low is just a first step. During the conference, Fed Up will also present a report from PolicyLink on what a more equitable recovery would look like. The report explores how genuinely full employment—which has long been a core policy mandate for the Federal Reserve—would reshape our economy. The report defines full employment as no more than 4 percent unemployment for all groups and a labor-force participation rate no lower than 75 percent for men and 60 percent for women. (Currently, labor-force participation remains stuck at 69 percent for men and 56.7 percent for women, the lowest levels in decades.)

As Barkan and Bivens emphasized, a change like that would have a particularly dramatic impact on communities of color. In Atlanta, black unemployment would drop 10 percent while average household income would increase by 11 percent for black families. A full 175,000 people would be lifted out of poverty and the local economy would grow by $24 billion. Nationwide, the change would be just as dramatic. Genuine full employment would cut black unemployment by two-thirds and lift more than nine million people out of poverty.

It’s this kind of recovery that the Fed needs to begin thinking seriously about, said Barkan. The first step, he added, is to rethink how monetary policy is formulated and who gets a seat at the table. 

Correction: In a previous version of this article, Dawn O'Neal's name was mispelled as O'Neil. 

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