Economy
Powell's Dashboard Shows How Far US Economy Has to Go on Jobs – BNN
(Bloomberg) — Federal Reserve Chair Jerome Powell says he and his colleagues have learned a lot over the last decade about the meaning of full employment. Now, they’re looking at a new set of labor-market indicators as they chart a recovery from the steepest economic downturn on record.
Call it the Powell dashboard.
The Fed chair has recently highlighted several data points that underscore the central bank’s shift in focus beyond headline numbers and toward the most vulnerable sections of the workforce. It’s an important development for Fed-watchers to graspin guaging how long policy makers will keep interest rates near zero as they judge incoming data, including Friday’s jobs report.
The approach marks an evolution from that of Powell’s immediate predecessor, Treasury Secretary Janet Yellen, who maintained a “dashboard” of metrics to help determine remaining slack in the labor market created by the Great Recession. It focused Fed-watchers on an array of statistics like job openings, layoffs, underemployment and long-term joblessness that applied to the entire labor force.
By comparison, the statistics on Powell’s list home in on things like Black unemployment, wage growth for low-wage workers and labor force participation for those without college degrees, categories that historically have taken longer to recover from downturns than broader metrics.
“It’s a pretty notable change,” said Seth Carpenter, a former Fed official who is now chief U.S. economist at UBS. The new definition of full employment reflects a growing understanding among policy makers that they can’t conclude the economy has reached such a state until “you really are starting to see businesses compete for workers at every part of the income distribution,” he said.
Here are some of the numbers Powell is watching that underscore the challenges ahead:
Black Unemployment
Covid sent Black unemployment surging to 16.7% in April and May of last year. By January it had recovered to 9.2%. But it reversed some of that progress last month, rising to 9.9%, according to Labor Department figures published Friday.
The Fed has faced growing pressure to acknowledge the uneven expansion in recent years, and the experience of the pandemic has only added to it. Powell has repeatedly said he wants to see broad-based gains in employment, and not just in the aggregate or at the median. In August, the Fed announced changes to its monetary policy strategy to codify a more inclusive approach.
The long economic expansion that preceded the pandemic continually defied forecasts of accelerating inflation even as unemployment dwindled, indicating potential for further labor-market gains. By mid-2019, Black unemployment had fallen to 5.2% — a record low in nearly a half-century of data.
During the financial crisis of 2008, Fed officials cut their benchmark interest rate to nearly zero, and didn’t begin raising it until December 2015. By then, the overall unemployment rate had recovered from a high of 10% to just 5%. But they didn’t take into account the unemployment rate for Black Americans, which at the time stood at 9.4%.
Low-Wage Earnings
As Fed chair, Yellen often cited wage growth as a metric for judging progress toward full employment, including a measure produced by the Atlanta Fed in her dashboard.
In a Feb. 10 speech, Powell cited pay for the bottom 25% of earners in particular. Just before the onset of the pandemic in the U.S., wage growth for this group of workers was 4.7% on a 12-month average basis, according to the Atlanta Fed. That marked its highest rate relative to overall wage growth since the late 1990s.
By January of this year, the latest month for which data are available, it had moderated to 4%. In the wake of both the 2001 and the 2007-09 downturns, earnings growth for the lowest wage quartile took almost three years to bottom out.
No College
Powell has also highlighted labor force participation rates specifically for those without college educations. The pandemic has had an outsize effect on them. As of last month, their participation rate was just 54.7%, according to the Labor Department figures published Friday.
Compare that with February 2020, when it stood at 58.3%, up from a low of 56.9% in 2015.
The magnitude of job losses during the Great Recession made the recovery from it a slow process. Many individuals looking for work eventually became discouraged and gave up, leading them to stop being counted as unemployed.
Under Yellen, the Fed elevated the labor force participation rate in its analysis of the state of employment to account for the likelihood that many of the so-called labor-force dropouts would take jobs if work was available. But the slow pace of recovery fanned arguments among policy makers over whether everyone who had lost work — especially the least-educated — would be able to find new employment and should therefore be counted in the shortfall.
In 2015, the year Yellen’s Fed began raising rates, “many forecasters worried that globalization and technological change might have permanently reduced job opportunities for these individuals, and that, as a result, there might be limited scope for participation to recover,” Powell said in his Feb. 10 speech.
But the next five years proved them wrong as those without college degrees were increasingly drawn back into the workforce.
As the Fed chair put it during an event on March 4: “Today, we’re still a long way from our goals.”
©2021 Bloomberg L.P.
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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.
Officially, Apple does not sell its products in Russia.
The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.
But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.
Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.
Zoya bought the watch without a moment’s delay.
The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.
“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.
“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”
Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.
But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.
Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.
The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.
The ‘poor borrower’ narrative rules in media coverage of the Bank of Canada and high interest rates, and that’s appropriate.
A lot of people have been financially slammed by the rate hikes of the past couple of years, which have made it much more expensive to carry a mortgage, lines of credit and other borrowing. The latest from the Bank of Canada suggests rate cuts will come as soon as this summer, which on the whole would be a welcome development. It’s not just borrowers who need relief – the boarder economy has slowed to a crawl because of high borrowing costs.
But high rates are also a big win for some people. Specifically, those who have little or no debt and who have a significant amount of money sitting in savings products and guaranteed investment certificates. The country’s most well-off people, in other words.
Lower rates will mean diminished returns for savers and less interest paid by borrowers. It’s a stretch to say lower rates will improve financial inequality, but they do add a little more fairness to our financial system.
Wealth inequality is often presented as the chasm between well-off people able to pay for houses, vehicles, trips and high-end restaurant meals and those who are driving record use of food banks and living in tent cities. High interest rates and inflation have given us more nuance in wealth inequality. People fortunate enough to have bought houses in recent years are staggering as they try to manage mortgage payments that have risen by hundreds of dollars a month. You can see their struggles in rising numbers of late payments and debt defaults.
Rates are expected to fall in a measured, gradual way, which means their impact on financial inequality won’t be an instant gamechanger. But if the Bank of Canada cuts 0.25 of a percentage point off the overnight rate in June and again in July, many borrowers will start noticing how much less interest they’re paying, and savers will find themselves earning less.
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