07.11.17

Humphrey Hawkins Preview: Who Will Defend the Full Employment Mandate?President Donald Trump has nominated to the Fed a Wall Street lawyer who thinks that the Fed is doing too much to promote job creation and favors rules-based decision making at odds with the requirements of the full employment mandate. Vice President Mike Pence and OMB Director Mick Mulvaney have both supported legislation eliminating the full employment mandate; House Speaker Paul Ryan also favors getting rid of it.

With the full employment mandate facing such dire threats and Federal Reserve Chair Janet Yellen scheduled to testify before the House and Senate on Wednesday, the Fed Up campaign is releasing a report highlighting the little-known history of the Fed’s legal obligation to pursue maximum employment, the important role that it played in improving the lives of tens of millions of people in the 1990s, and the need to continue pursuing genuine full employment today. Dozens of Fed Up members will be present at the House hearings on July 12, wearing the campaign’s hallmark green t-shirts.

The Fed Up campaign expects that Chair Yellen will be asked about the full employment mandate during her Senate and House testimony by members of Congress who are committed to seeing the American economy work for all.

The new Fed Up report highlights the crucial role that Black civil rights leaders, beginning in the 1930s and up through the crucial leadership of Coretta Scott King in the 1970s, played in the passage of the Employment Act of 1978 Full Employment Act that established the dual mandate.

The full employment mandate enshrined in the Act is under imminent threat with the nomination of Randall Quarles, who advocates following the Taylor rule, which would limit the Fed’s ability to make decisions prioritizing full employment, undermine a crucial pillar of Coretta Scott King’s civil rights legacy, and cost Americans millions of jobs.

The Fed Up report comes in the wake of an important new Federal Reserve research paper that shows both that racial disparities in the labor market cannot be explained by any observable characteristic (such as educational attainment) and that these disparities can be significantly mitigated by genuine full employment. The research paper is another promising sign that the Federal Reserve is paying more attention to racial disparities — long a central demand of the Fed Up campaign — that builds upon the Fed’s recent adoption of a policy of reading out employment statistics disaggregated by race during all FOMC deliberations. The paper puts new pressure on the Fed not to intentionally slow down the economy this year.

During her testimony, the Fed Up campaign hopes that Chair Yellen will speak to three crucial components of defending and actualizing the Fed’s full employment mandate:

1. Responding to the call of prominent economists last month to raise the Fed’s too-low 2% inflation target in order to mitigate future recessions.
2. Explaining why the Fed would continue on its  path of slowing down the economy this year given that inflation is falling and not showing  any signs of passing 2%, particularly given Yellen’s repeated commitments that the 2% target is an average not a ceiling.
3. Explaining what the Fed is doing in order to promote diversity within the Fed’s leadership, particularly given the opportunity to name a new Richmond Fed President. The Fed Up campaign this week is releasing a letter to Janet Yellen signed by 30 national and southern organizations and a petition with over 13,000 signatories calling on her to insist on the selection of a person of color for the Richmond presidency and to prioritize diversity in her selection of Class C directors. As Minneapolis Fed presidents Kocherlakota and Kashkari have noted, the presence of people of color in decision-making positions is likely to have a major impact on policy outcomes. This is particularly true given the new Fed research showing the importance of full employment for reducing racial disparities in the labor market.

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www.thepeoplesfed.org

Fed Up is a coalition of community organizations, labor unions, and policy experts  across the country calling on the Federal Reserve to reform its governance and adopt policies that build a strong economy for the American public. The Fed can keep interest rates low, give the economy a fair chance to recover, and prioritize genuine full employment and rising wages for all communities.

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Contact:

Ady Barkan, (917) 605-4345, abarkan@populardemocracy.org