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Key S/T Resistance Exposed

By Jean Yung
     WASHINGTON (MNI) - The economic expansion will likely continue to benefit
disadvantaged groups in the labor market by drawing them back into employment,
but a number of structural barriers remain that cannot be easily address by
Federal Reserve policies, Fed Gov. Lael Brainard said Tuesday. 
     Factors such as discrimination, access to education, and social networks
may be contributing to higher rates of unemployment among black and Hispanic
populations, which continue to pose challenges to the Fed's goal of fostering
maximum employment. 
     "As the economic expansion continues and brings more Americans off the
sidelines and into productive employment, it seems likely that the positive
trends in employment and participation rates for historically disadvantaged
groups will continue," she said. 
     "That said, the benefits of a lengthy recovery can only go so far, as the
research points to some barriers to labor market outcomes for particular groups
that appear to be structural." 
     Differences in unemployment rates across racial and ethnic groups are now
near historic lows and will likely "continue to shrink if the overall
unemployment rate falls further," Brainard said.
     But the Fed's upcoming triennial Survey on Consumer Finances, to be
released Wednesday, finds the disparities in the labor market mirrored in
groups' income and wealth. 
     The average income for white families in 2015 was about $123,000 per year,
compared with $54,000 for black families and $57,000 for Hispanic families, the
survey found. Average wealth holdings for white families in 2016 were about
$933,000, compared with $191,000 for Hispanic families and $138,000 for black
     "A significant portion of the gaps in unemployment rates across racial and
ethnic groups cannot be attributed to differences in their underlying
characteristics, such as age and education levels," Brainard said. 
     Unfortunately, policy tools available to the Fed are not well suited to
address some of these underlying issues, though Fed researchers strive to
increase the public's understanding of these issues, Brainard said. 
     Brainard noted that consulting data outside of the headline unemployment
rate and inflation pressures is necessary in assessing how close the labor
market is to the Fed's full employment goal. This is "especially true at a time
when the traditional Phillips curve relationship is flatter than in the past,
which means that price inflation is likely to be less informative regarding
labor market tightness than it was previously," she said.
--MNI Washington Bureau; +1 202-371-2121; email: