As part of the Federal Reserve’s efforts to review the way it conducts monetary policy and to better understand how its policies impact people in local communities, the System has launched Fed Listens. This series of public events seeks to reach out to a broad range of community stakeholders including small business owners, nonprofit organization executives, and labor leaders for insights and feedback.
The Philadelphia Fed hosted its Fed Listens event on Friday, May 17, 2019, starting with a community tour in Camden, NJ, focusing on the critical intersection of education, employment and labor market dynamics. Stakeholders will share some of the workforce development challenges in the postindustrial city of Camden and highlight solutions that are helping to connect low- and moderate-income (LMI) residents to quality jobs.
The program included remarks from both Philadelphia Fed President Patrick T. Harker and Federal Reserve Board Vice Chair Richard H. Clarida, as well as discussions on the impact of monetary policy on economic growth and economic opportunity. Attendees had the opportunity to reflect on how monetary policy affects business growth, job creation, household financial stability, job access, and economic mobility.
For more information on the Fed Listens events and Fed policy actions and communications, please visit the Board of Governors’ website.
Watch Video from This Event
Patrick T. Harker
President and CEO, Federal Reserve Bank of Philadelphia
Richard H. Clarida
Vice Chair, Board of Governors of the Federal Reserve System
Panel 1: Monetary Policy and Economic Growth
- Alex Costabile, Vice President of Strategy, Wawa
- Ali Houshmand, President, Rowan University
- Julia H. Klein, Chairwoman and CEO, C.H. Briggs Company
- André Kurmann, Associate Professor of Economics, Drexel University
Panel 2: Monetary Policy and Economic Opportunity
- Stuart Comstock-Gay, President and CEO, Delaware Community Foundation
- Jesse Ergott, President and CEO, NeighborWorks Northeastern Pennsylvania
- Stephanie Gambone, Executive Vice President, Philadelphia Youth Network
- Omar Woodard, Executive Director, GreenLight Fund Philadelphia
Moderators: Michael Dotsey, Executive Vice President and Director of Research, and Andrew Hill, Economic Education Officer, Federal Reserve Bank of Philadelphia
Closing Reflections and Remarks
Richard H. Clarida and Patrick T. Harker
On May 17, the Federal Reserve Bank of Philadelphia hosted a Fed Listens event attended by Vice Chair Richard H. Clarida and Ellen Meade, special adviser to the vice chair. Philadelphia Fed President Patrick T. Harker; Theresa Y. Singleton, senior vice president of the Community Development and Regional Outreach Department; and Ashley Putnam, director of the Economic Growth & Mobility Project, along with other Philadelphia Fed colleagues, participated in the listening tour.
The morning began with visits to a new manufacturing facility and a charter school in Camden, NJ to showcase workforce development — something that the Philadelphia Fed believes is a key component of a healthy labor market.
The afternoon featured panel sessions that focused on the main directive of the Fed Listens initiative: to understand how different members of the public view the Fed, monetary policy, and the Fed’s impact on the economy. To gather a wide range of viewpoints, the afternoon sessions were divided into one panel of representatives from business and academia and a second panel of leaders from the philanthropic and nonprofit sectors. The first panel explored monetary policy and economic growth, and the second highlighted monetary policy and economic opportunity. The auditorium audience of about 90 guests included community development stakeholders, members of the Bank’s board and advisory councils, and Fed employees. Both sessions were moderated by Michael Dotsey, executive vice president and director of Research, and Andrew Hill, economic education officer.
The goal of the panels was to delve into the basic questions posed by the Fed Listens initiative around the Fed’s strategy, tools, and communications with an emphasis on the statutory goals of maximum employment and price stability. Other questions around the Fed’s research and community work were also included.
How is the economy doing?
When asked about the current state of the U.S. economy, both panels agreed that the economy was doing well and growing at a solid pace, but panelists said they felt that the progress was not evenly shared. The topic of inequality was discussed widely in both panels. One business owner mentioned strong commercial construction and healthy home remodeling activity as signs of overall economic strength but said there remain regions where “the economy is not doing so well” and that “people are still struggling.”
A philanthropic chief executive from Delaware mentioned that communities where the labor market is stagnant are dealing with empty storefronts, high rates of opioid addiction, and high levels of stress among households. A retail executive said it is essential that any discussion about the economy include addressing inequality. “How do we share the growth of the economy in a better way? How do we ensure the whole population is rising and sharing in the growth of the economy?” he said.
How are labor markets doing?
Both panels were asked about labor markets. Again, the consensus was that labor markets are doing well, but mainly for high-skilled workers or for workers in vibrant urban areas. Others are missing out. Both panels placed greater emphasis on wages and uneven access to jobs than broader regional employment trends. The economics professor said, “People have jobs but [not all are] well-paying jobs.” The Delaware philanthropist agreed: “Full employment at very low wages masks part of the problem.” But the business owner said the high cost of health care had to be taken into account.
The employment discussions also turned to the topic of the skills gap, with a specific focus on the U.S. educational system’s shortfalls. “Education is strategic for the future,” said the college administrator, “but we have not changed our traditional educational system. And we need to realize that not every 18-year-old should go to college.”
Panelists agreed that job training is essential to creating a more inclusive economy. Such training could be done by employers, nonprofits, or the government. A community leader who works with disconnected youth in Philadelphia said better education access would give young people job opportunities, not just for now but also for the future.
And what of the future of work? In addition to the consensus view that our education system needs a reset, panelists also discussed the idea that automation will make career paths uncertain. “A big challenge is: Who are we going to train and for what jobs?” said the college administrator.
One interesting anecdote was shared by the business owner, who said her current staff of truck drivers were aging into retirement, leaving a skills gap for her company. “We’re all waiting for autonomous vehicles,” she said, “but until then, we need truck drivers.” The conundrum for her company was how to attract younger workers to become truck drivers when that job may be obsolete in 10 to 15 years.
Which is more important: maximum employment or price stability?
Regarding the Fed’s dual mandate, the panels posted a split decision. The business-academia panel sided toward price stability, while the community development panel leaned toward maximum employment.
The reasons for price stability primacy was, as the economic professor pointed out, because it “can be more easily guided by Fed policy. The Fed funds rate is a blunt tool to affect the labor market.”
Both business executives mentioned that the internet has changed pricing decisions. The business owner explained that the internet has brought with it pricing transparency, which has created a very narrow band in which to raise prices. The retailer agreed, saying, “The empowerment of the consumer has changed the dynamic between business and the consumer.”
The second panel, however, thought maximum employment was the more important goal, especially regarding low- and moderate-income (LMI) and minority communities. A leader in the nonprofit investment fund sector said the racial wealth gap is a result of lower wages and high unemployment for minorities over many decades. In his view, the current employment situation in some neighborhoods is similar to that of the nation during the Great Recession. He asked, “What is the role of monetary policy once you disaggregate the data: Does a 10 percent unemployment rate in the Asian American, Latino, or African community obligate the Fed to act as it did during the financial crisis?”
How does monetary policy filter down to everyday activity?
The view on both panels was similar: Most people do not connect the Fed and its work to their everyday lives. A major reason for that is because many challenges faced routinely in the economy — income inequality, a lack of access to transit, the skills gap — are not responsive to current Fed monetary policy tools, most notably the fed funds rate.
One nonprofit expert whose work focuses mainly on affordable housing issues said Fed policy can have an indirect role in daily decision-making. He said, “When I think of monetary policy, I think it comes down to confidence. If monetary policy is working well, then individuals have confidence in their own situations and businesses have confidence in the decisions they are making about the future.”
What could the Fed do better?
The advice for the Fed centered on functions the Fed already performs — but that the public may not know fully about.
Members of both panels called for the Fed to take a bigger role in promoting financial literacy. “We are finding our employees, even highly skilled, have very low financial understanding,” said the business owner. “If there is a role for the Fed to explain how money works, how business works, I think that would be a tremendous and big impact.”
A greater understanding of how credit works could also help LMI households avoid decisions that can worsen budget strains. “Financial troubles can come from misinformation, such as with predatory lending,” said the college professor.
The nonprofit funding executive said the Fed is one institution that has the reach and scale to promote financial education. Such assistance in LMI communities could help to lessen the distrust in the banking system and enable individuals to make better saving and credit decisions, which could help build wealth.
Panelists also applauded the Fed’s outreach work with various partners. Within the System, this function is framed as the Fed’s “convening authority,” but for the panelists, this is the Fed’s ability to bring together different voices to discuss economic challenges. Fed conferences and research can inject economic issues into the public conversation. “The Fed talking about issues related to workforce and community development makes a big difference to our work,” said a workforce development expert.
Panelists suggested that the Fed could do more. “The Fed needs to say, ‘We want to understand what’s going on in your community so we can better understand how to conduct policy or regulate banks better.’ People will respond to that,” said the affordable housing leader. One caution, however, was that the Fed has to be intentional about its outreach efforts. As the philanthropist from Delaware said, “People are not interested in having conversations that don’t lead anywhere.”