For Some Americans, a Fed Rate Hike Could Come Too Soon

Taking a closer look at the jobs numbers for the whole story.

A Fed Rate Hike Isn't Good News for Everyone

The Federal Reserve is widely expected to raise interest rates this week. That’s bad news for two big groups of people: the unemployed, who might not get jobs now, and the recently employed, who are in danger of losing them.

Higher interest rates would chill consumer spending and business investment. Some economists say the biggest losers could be people who tend to have a hard time finding jobs. That includes ex-convicts, people with disabilities, African Americans, Hispanics, teenagers, and those without a high school education. 

“Every time we get to this point, the Fed says, ‘Oops, tight labor market,’ and they tighten up interest rates, and firms go back to their old ways,” said William Spriggs, chief economist of the AFL-CIO. “It really is discouraging.”

The Federal Open Market Committee will meet on Tuesday and Wednesday. Officials have been signaling that they’re likely to raise the federal funds rate by a quarter of a percentage point from its current rock bottom level of zero to 0.25 percent. It’s been there since December 2008, during the financial crisis. Raising the federal funds rate—the rate that banks charge each other for overnight loans of reserves—could push up a wide variety of interest rates that ordinary people and businesses pay.

Ultimately, how hot to run the U.S. economy comes down to a judgment about what’s important. The Fed’s decisions, while couched in the antiseptic language of monetary economics, are unavoidably bound up in hard questions about fairness, race, and inequality.

 

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