Federal Reserve Chairman Ben S. Bernanke said aiding low-income neighborhoods requires a “multipronged” approach focusing on education, jobs and health care as well as housing.
“Resilient communities require more than decent housing,” Bernanke said today in Washington in a speech to a community development research conference sponsored by the Fed. “They require an array of amenities that support the social fabric of the community and build the capabilities of community residents.”
The Fed chairman noted that “low-income communities were particularly hard hit by the Great Recession.” While employment and housing show signs of improving, “conditions in lower- income neighborhoods remain difficult.”
The financial crisis and the worst recession since the Great Depression pushed down earnings and wealth among low income households, according to research by the Minneapolis Fed. Earnings among the bottom 20 percent of U.S. wage and salaried workers fell by about 30 percent during the downturn compared with the median income, as workers lost their jobs or left the labor market, the study said.
“In terms of earnings, the bottom 20 percent of the U.S. population has never done so poorly, relative to the median, during the whole postwar period,” researchers Fabrizio Perri and Joseph Steinberg said in the February 2012 paper. The group also faced “rapidly declining wealth,” the authors said.
Bernanke, while not mentioning monetary policy or the economic outlook, cited examples where successful community redevelopment required participation by store owners, community centers, friends and neighbors. He is not expected to take questions from the audience.
The 59-year-old Fed chairman is leading the Federal Open Market Committee’s efforts to pump monetary stimulus into the economy to help reduce 7.6 percent unemployment. The Fed announced a third round of quantitative easing in September and boosted it in December to $85 billion of monthly bond purchases.
U.S. central bankers estimate that the U.S. economy would fully use labor resources when the unemployment rate ranges between 5.2 percent and 6 percent.
U.S. payrolls grew by 88,000 last month, the smallest increase since June, the Labor Department said on April 5. Average hourly earnings were unchanged in March from the prior month, the weakest showing since October.
Recent reports have added to concern that across-the-board government budget cuts, known as sequestration, will impede progress made in the job market. Reductions in planned spending, which began March 1, trim 5 percent from domestic agencies and 8 percent for the Defense Department this fiscal year.
Fed Governor Sarah Bloom Raskin plans to speak on inequality and the business cycle in New York on April 18.
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