Federal Reserve Governor Sarah Bloom Raskin said low borrowing costs, while spurring the economic expansion, can’t create the higher-quality jobs needed by low- and moderate-income workers.
The central bank has fueled job growth by keeping the main interest rate near zero since December 2008, Raskin said today in a speech in Washington. Still, the Fed has “little effect on the types of jobs that are created” over the longer term.
“Our country cannot achieve prosperity without addressing the powerful undertow created by flat wages and tenuous financial security for so many millions of Americans,” Raskin, 51, said in the text of remarks to the National Community Reinvestment Coalition. The recession hurt low- and moderate- income Americans the most and restricted access to borrowing is impeding their recovery, she said. “Access to credit is an enduring challenge.”
The Fed is attacking joblessness with $85 billion in monthly bond buying, which the Federal Open Market Committee on March 20 reiterated it will continue until the labor market improves “substantially.” The FOMC also said it will keep the main interest rate near zero as long as unemployment is above 6.5 percent and it expects inflation of less than 2.5 percent.
While about two-thirds of all job losses in the recession were in moderate-wage positions such as manufacturing, construction, and office administration, those fields account for less than a quarter of job gains since then, she said. Lower-wage jobs such as retail sales and food service made up about a fifth of job losses and half of later gains, she said.
“Wage growth has remained more muted than is typical during an economic recovery,” Raskin said. “To some extent, the rebound is being driven by the low-paying nature of the jobs that have been created. The slow rebound also reflects the severe nature of the crisis, as the slow wage growth especially affects those workers who have become recently re-employed following long spells of unemployment.”
Increased hiring is sustaining the recovery. Employment rose 236,000 in February after a revised 119,000 gain the prior month that was smaller than first estimated, Labor Department figures showed March 8. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped to 7.7 percent, the lowest since December 2008, from 7.9 percent.
Construction hiring jumped by the most in almost six years. Payrolls also climbed at retailers and professional and business services such as temporary-help firms.
Private payrolls, which don’t include jobs at government agencies, rose by 246,000 in February after a revised gain of 140,000 the previous month. Economists forecast they would grow 170,000 following an initially reported 166,000 gain in January.
Fewer Americans than forecast filed first-time claims for unemployment insurance last week, a signal the labor market is maintaining its recent progress. Applications for jobless benefits increased by 2,000 to 336,000 in the week ended March 16, Labor Department figures showed yesterday. The four-week moving average of claims, a less-volatile measure, dropped to a five-year low of 339,750 from 347,250.
Fed policy makers at this week’s meeting lowered their expectations for the unemployment rate at the end of the year to a range of 7.3 percent to 7.5 percent from a previous forecast of 7.4 percent to 7.7 percent. The economy will expand 2.3 percent to 2.8 percent this year, they estimate, compared with their earlier forecast of 2.3 percent to 3 percent growth.
Raskin was appointed by President Barack Obama in 2010 for a term that expires in 2016. Before joining the Fed she was Maryland’s Commissioner of Financial Regulation, and before that she was a managing director at the Promontory Financial Group, a consulting firm, and served as a staff attorney to the Senate Banking Committee, according to the Fed website.
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