Protest calls for Fed to focus on employment. Would that help?
That was the question being asked Thursday by a small group of activists outside the Federal Reserve Bank of St. Louis.
About a dozen protesters called on the Fed to focus on unemployment, especially among minorities, rather than on keeping inflation rates low. They said if the Federal Open Market Committee raises the interest rate this year, as anticipated, it would likely mean fewer jobs.
"We’re calling on the Fed to do the right thing by most people, because the people they’re helping by changing the policy is a very small minority people and a very influential and affluent group of people," said Derek Laney of Missourians for Reform and Empowerment.
The protest was one of several held at Federal Reserve Banks around the country to highlight a new report by the Center for Popular Democracy and the Economic Policy Institute. The report calls on the Fed to focus on “full unemployment,” and highlights disparities between white and minority unemployment levels.
In Missouri last year the unemployment rate for African-Americans was 14.4 percent, while the rate for whites was just 5.1 percent, according to the Bureau of Labor Statistics. Several of the protesters, who represented a variety of local groups, including MORE, the Organization for Black Struggle, Veterans for Peace, Pro-Vote and Young activists United STL, had personal stories of being out of work and struggling.
Reginald Rounds with MORE said he had recently gotten a bachelor’s degree but still couldn’t find work.
"There is no recovery in the community in which I live," said Rounds. "I talked to many people in different organizations and churches throughout the city as we worked on the Don’t Shoot Coalition. It’s my personal belief that a lot of things that happened in Ferguson just boiled over from all the tensions of unemployment, job creation, housing and our educational system."
The Federal Reserve Bank of St. Louis said in an emailed statement that officials reached out to protesters on Wednesday and asked them to meet to discuss the report.
"The Fed has a dual mandate to keep inflation low and stable and to foster maximum sustainable employment. It takes these responsibilities very seriously," said Karen Branding, senior vice president of public affairs, in the statement.
Washington University economist Jennifer Dlugosz said the Fed has good reason not to focus too tightly on lowering unemployment levels.
"We know from macroeconomics that if the Fed tries to push the rate of unemployment below the natural rate, which people think is 5.5 percent, that it wouldn’t work and that it would just accelerate inflation," she said.
Dlugosz, who previously worked for the Fed’s Board of Governors in Washington, D.C., said monetary policy is not the right tool to address unemployment disparity. Instead, she said, targeting labor market and education policies to create more equality would likely have better results.
The report also took aim at the Fed’s transparency, especially in choosing the board of directors for each of the 12 Federal Reserve Banks. The protesters argued too many corporate and bank executives take those positions, including in the Federal Reserve Bank of St. Louis’ board of directors.
"It’s basically bankers, and that’s in the charter, and there’s whole bunch of other folks who could be from labor and working people, but are instead from big corporations," said Jeff Ordower of MORE.
The board of directors in each of the Federal Reserve districts is responsible for choosing the president of the Reserve Banks. Those presidents rotate onto the Federal Open Market Committee, which meets eight times a year and decides the nation’s monetary policy. (Learn more about how it all works here on the Federal Reserve Bank of St. Louis' website.)
In her statement, Branding said the Fed was designed by Congress to “represent the voice of Main St."
"At the St. Louis Fed we have significant dialogue with business leaders, community development organizations, educators and the public,” she wrote. “We have a diverse board of directors who are familiar with economic and credit conditions in the district.”
Professor Dlugosz said the make-up of the boards is somewhat limited by statute. Each district’s community bank members choose three bankers to sit on the board and three non-bankers. The other three directors are chosen by the Fed’s Board of Governors in Washington, D.C, and are supposed to represent a mix of labor, agriculture, industry, and consumers.
Dlugosz said the last group, known as “Class C,” is the most likely group to represent the interests of the public, since they’re appointed by the Board of Governors.
"That’s really, I’m guessing, the main place where you’re going to see heads of labor unions or consumer advocates. If they’re getting on there, I imagine it’s the Board that’s electing them," she said. "I don’t know if that’s changed over time, but one would hope that they’re keeping an eye on it."
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