MNI INTERVIEW:Fed Seeks Community Input To Weigh Jobs Progress

The Federal Reserve is meeting with community leaders more than scheduled as it seeks to determine its progress towards redefined employment goals and wade through heightened uncertainty from the Covid shock, a member of the central bank's Community Advisory Council told MNI.

"We did meet throughout the year and had more meetings than normal," said Lora Smith, executive director of the Appalachian Impact Fund in Eastern Kentucky. "The chairman was very engaged with us," she said of Fed Chair Jerome Powell.

Shortages of jobs and affordable housing are far greater problems for distressed communities like the one Smith's fund serves than concerns over rising prices, she said.

"I don't know that people are super concerned about inflation so much as just trying to survive and make a living," she said.

The creation of the Community Advisory Council was part of a years-long effort begun under former Fed Chair Janet Yellen to make central bank policy less financial-markets centric and more focused on broader public needs. Extended under Chair Powell's leadership, the push culminated in a series of "Fed Listens" conferences focused on underrepresented communities and, ultimately, in a direct shift in the central bank's policy framework last year.

Smith said the pandemic meant the board was particularly concerned with getting regular updates about conditions on the ground since Covid started. Her last in person meeting was for a Fed orientation in February of 2020.

INCLUSIVE EMPLOYMENT GOALS

In August of last year, the Fed announced it was adopting a new Statement on Longer-Run Goals that, in addition to seeking a modest overshoot of its inflation goal to make up for past misses, widened its definition of full employment by specifically stating that "the maximum level of employment is a broad-based and inclusive goal."

Policymakers say this means the Fed will keep monetary stimulus at full steam for longer than might otherwise be the case as it seeks full confirmation of a recovery -- not just forecasts that one is likely afoot.

That shift, in addition to more active fiscal policy, has sparked a debate over inflation risks both among former and current Fed officials, although the latter have primarily focused on lingering disinflationary forces in the economy -- including Richmond Fed President Thomas Barkin in an interview with MNI last week.

That makes sense to Smith, who in addition to dealing with the remnants of the Covid shock is now facing another set of relief efforts, this time from devastating floods that have wrecked parts of Eastern Kentucky. The U.S. jobless rate stood at a historic low of 3.5% before the pandemic with little sign of fueling inflation. It surged as Covid shut the economy down before easing steadily to 6%, although a sharp decline in participation masks worse employment conditions.

"What people are focused on here are very pragmatic and practical needs" including childcare, healthcare and housing, she said. "Our economy has never been good. We have double the national average of unemployment and double the national average of people living in poverty."

The 15-member advisory group created in 2015 is supposed to meet twice a year and deliver its views and recommendations to the Federal Open Market Committee. "They're very thoughtful about the folks that they bring on -- my experience has been really good," Smith said. "The Fed is very concerned about making sure rural and other voices are represented, especially from communities that don't normally get a seat at the table and where there are real long-standing issues."