Perspectives from the Public

Part of the Federal Reserve’s Review 

of Monetary Policy Strategy, Tools, 

and Communication Practices

June 2020

FEDERAL RESERVE SYSTEM

CONTENTS

INTRODUCTORY NOTE FROM CHAIR POWELL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

FOREWORD: FED LISTENS COVID-19 UPDATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

PART 1: THE FED LISTENS INITIATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PART 2: EVENT SUMMARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Federal Reserve Bank of Dallas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Federal Reserve Bank of Minneapolis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Federal Reserve Bank of Richmond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Federal Reserve Bank of Boston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Federal Reserve Bank of Philadelphia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Federal Reserve Bank of New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Federal Reserve System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Federal Reserve Bank of Cleveland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Federal Reserve Bank of Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Federal Reserve Bank of St. Louis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Federal Reserve Bank of San Francisco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Board of Governors of the Federal Reserve System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Federal Reserve Bank of Kansas City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Federal Reserve Bank of Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Update, Board of Governors of the Federal Reserve System . . . . . . . . . . . . . . . . . . . . . . . 109

PART 3: FEDERAL RESERVE SYSTEM RESEARCH CONFERENCE . . . . . . . . . . . . . . . . . . . . . . . . 113

ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

v

In 2019, the Federal Reserve launched—for the first time—a review of the 

monetary policy strategy, tools, and communication practices we use to 

pursue our congressionally mandated goals of maximum employment 

and price stability. Reviews like ours are part of good institutional practice, 

providing an opportunity to take a step back and ask whether we could 

be doing our job more effectively. A central part of our review was Fed 

Listens, a series of events held around the country to consult with a range 

of organizations—employee groups and union members, small business 

owners, residents of low- and moderate-income communities, retirees, and 

others—on the effects that labor market conditions, inflation, and interest rates have on them.

Our Fed Listens series concluded before the coronavirus (COVID-19) outbreak and its transmission 

around the world, with tragic loss and tremendous personal and economic hardship here in 

the United States and in other countries. At the time of the Fed Listens events, our country was 

experiencing the strongest labor market in 50 years and generating employment opportunities for 

many Americans who had not found jobs readily available in the past. One clear takeaway from 

these events was the importance of sustaining a strong job market, particularly for people from 

low- and moderate-income communities. Everyone deserves the opportunity to participate fully in 

our society and in our economy.

In light of the rapidly changing public health and economic environments, the Federal Reserve 

held a virtual Fed Listens update on May 21, 2020, summarized in the foreword of this report. The 

remainder of the report reviews the Fed Listens events and shares important points that we heard 

consistently. The lessons we learned were never more urgent than today as Americans navigate 

through these challenging times. People have put their lives and livelihoods on hold during this 

public health emergency at significant economic and personal cost. While all of us have been 

affected, the burdens are falling most heavily on those least able to carry them. The Federal 

Reserve remains focused on its goals and on laying the foundation for a return to the strong labor 

market that we saw at the time of our 2019 Fed Listens conversations.

Jerome H. Powell

Chair, Board of Governors of 

the Federal Reserve System

INTRODUCTORY NOTE FROM 

CHAIR POWELL

vii

FOREWORD: FED LISTENS COVID-19 

UPDATE

The Federal Reserve Board convened an event, “Fed Listens Update: How Is COVID-19 Affecting 

Your Community?” on May 21, 2020, to hear from a number of the panelists who participated in 

Fed Listens events in 2019 about the effects of the rapidly changing public health and economic 

environments resulting from the spread of the coronavirus (COVID-19) in the United States. The 

panelists—representatives of workers, education, affordable housing, retirees, small business, and 

community financial institutions—met virtually with Board members to share their perspectives 

on issues pertinent to the Federal Reserve’s congressionally mandated goals of maximum 

employment and price stability. A detailed summary of the event appears in Part 2 of this report.

Key highlights are summarized here.

Hard-hit Neighborhoods

Low-income neighborhoods have been hit hard by COVID-19, with large job losses and high 

rates of infection. Jobs may be slow to return, and for workers in service industries that have been 

significantly affected—travel and dining, for example—some job losses may be permanent. For 

low-income workers who remain employed, jobs now entail greater demands and riskier working 

conditions. Adding to these concerns are school closings and an absence of childcare.

Paying the Bills

Many who have been laid off are benefiting now from the one-time stimulus checks and temporary 

increase in unemployment insurance (UI) benefits enacted in the CARES Act (Coronavirus Aid, 

Relief, and Economic Security Act). The supplementary UI will end this summer. At that point, it will 

be difficult for many families to meet their financial commitments—rent, food, utilities, and other 

payments—if the economic downturn continues and the benefits are not renewed.

Education

Apprenticeship programs for community college students in the Chicago area have allowed 

those students to remain employed during the COVID-19 crisis and work remotely. The option 

for working remotely is a privilege and is not widespread in lower-income, largely minority 

neighborhoods.

Retirees

Older Americans are very concerned about the health aspects of the pandemic and about the 

risks associated with reopening the economy too soon. They report greater concern about their 

financial situation than they did before the public health crisis emerged.

Inequality

Panelists expressed concern that the COVID-19 crisis will exacerbate existing inequality, especially 

for African American and Latinx communities.
viii

Fed Listens | Perspectives from the Public

Challenges for Businesses in the Food Service Industry

Demand for specialty food items is down even as the consumer grocery bill is higher. Restaurants 

are changing their offerings to reflect demand for takeout and delivery—including basic 

foodstuffs—and will need to modify floor space to permit social distancing in the kitchen and 

dining room. Premium pay is necessary in light of hazardous conditions and the magnitude of the 

supplementary UI benefits.

Community Financial Institutions

Community development financial institutions and community banks have been successful in 

helping their borrowers apply for and obtain loans under the Paycheck Protection Program (PPP), 

which has offered a lifeline for many small businesses. Community financial institutions have also 

deferred loan payments and made new loans and grants to small business customers.

Financial Stewardship

Community financial institutions are providing assistance and offering financial advice to many 

small business customers who lack familiarity with banking services, have no experience accessing 

their bank via the internet, or did not see a PPP loan as an option for them.
1

PART 1: THE FED LISTENS INITIATIVE

In 2019, the Federal Reserve began a broad review of the monetary policy strategy, tools, and 

communication practices it uses to pursue its congressionally mandated goals of maximum 

employment and price stability—the so-called dual mandate. The Federal Reserve undertook 

the review because the U.S. economy appears to have changed in ways that matter for monetary 

policy. Importantly, the general level of interest rates has fallen in recent decades in the United 

States and abroad to such an extent that many central banks, including the Federal Reserve, 

now have limited scope to reduce short-term interest rates when the economy deteriorates. The 

Federal Reserve undertook a review of its framework for monetary policy in order to consider 

what policy strategy will best enable the Federal Reserve to meet its dual mandate in the future, 

whether the existing monetary policy tools are sufficient to achieve and maintain the dual 

mandate, and how its communication about monetary policy can be improved.

A key component of the review was a series of Fed Listens events aimed at consulting with a broad 

range of stakeholders in the U.S. economy. From February to October 2019, the Federal Reserve 

hosted 14 public Fed Listens events—one at the Board of Governors, one at each of the 12 

Reserve Banks, and a System research conference at the Federal Reserve Bank of Chicago.

Although the Federal Reserve regularly engages with a broad range of groups as part of 

outreach efforts focused on issues affecting specific communities, the goal of Fed Listens was for 

policymakers to engage directly with a range of individuals and groups on issues pertaining to 

the dual-mandate objectives of maximum employment and stable prices. The process of public 

engagement helped foster transparency of the review through communication with the general 

public, thereby enhancing the Federal Reserve’s accountability. In organizing the Fed Listens

events, the System leveraged its existing network of contacts, and the events themselves brought 

attention to the regular interactions that the Reserve Banks and the Board already have with 

groups around the country.

This report reviews the Fed Listens initiative, providing information about the format of and 

participants in the events, as well as the points that were highlighted consistently across the 

events. While many of the concerns raised by participants at the events lie outside the mandate 

of the Federal Reserve, participants offered insights into the effects that labor market conditions, 

inflation, and interest rates have on them, in ways that augment policymakers’ understanding of 

the effects of their monetary decisions on these populations.

Structure of the Events

As shown in the table, the formats and participants varied widely across the 14 Fed Listens events 

that the Federal Reserve System hosted between late February and mid-October 2019. Most of 

the events featured one or more panel sessions with representatives of a wide array of groups and 
2

Fed Listens | Perspectives from the Public

organizations. A couple of the events included academic sessions with paper presentations and 

discussants. A few incorporated visits to schools, businesses, or both to learn about local initiatives 

in underserved communities to increase education (in Dallas, Texas, and Camden, New Jersey), 

combine high school completion with work experience (in Augusta, Georgia), or offer after-hours 

vocational training to enhance skill levels (also in Camden).

All of the events featured a broad set of participants drawn from outreach conducted specifically 

for the Fed Listens initiative or from the System’s existing advisory councils and community 

networks.

1

 The participants represented small businesses, employee groups and labor unions, 

state and local governments, schools and community colleges, workforce development 

organizations, housing groups, community development financial institutions (CDFIs), and retirees; 

in addition, researchers from academia and think tanks as well as financial market economists were 

included in a few of the events. Many of the participants in the events hailed from organizations 

representing historically disadvantaged populations or underserved communities.

While members of the community affairs staff at the Reserve Banks regularly interact with such 

groups as part of ongoing outreach, the Fed Listens events were distinct in their focus. At the 

events, questions posed to the participants centered not only on the effects of monetary policy 

actions on them and the groups they represent, but also on how they view the relative economic 

importance of the dual-mandate goals. In many of the panel sessions, participants were asked 

to comment on current labor market conditions, their interpretation of maximum employment, 

lending conditions facing their organizations or communities, responses to changes in interest 

rates, and concerns about inflation. In addition, participants were often asked to compare 

economic conditions today with those in the past (a few years or a decade ago) and to assess 

the Federal Reserve’s communications with the public. At a few of the events, participants were 

asked about the distributional effects of monetary policy. A panelist at the research conference 

in Chicago noted, based on his many years of interactions with the Federal Reserve, that the 

Fed Listens initiative was something “at a different level” in terms of engagement relative to the 

System’s community outreach and research functions.

2

To highlight the transparency of the review process and the Fed Listens initiative, all of the events 

were livestreamed, with video recordings available soon afterward. Written summaries of the 

events were posted.

3

 All of the events were attended by at least one Board member and Bank 

president. In keeping with the “listens” framing of the events, policymakers offered only brief 

introductory or closing remarks, and they sometimes posed questions to the participants.

1 In addition, members of Reserve Bank boards of directors were participants in the Fed Listens events at the Board of Governors and 

in New York, Philadelphia, and San Francisco.

2 The quoted text is from the first panel session at the System research conference in June 2019; the session is summarized in Part 2 of 

this report.

3 The Board’s website houses a Fed Listens page with links to all of the materials, available at https://www.federalreserve.gov/

monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-fed-listens-events.htm. The Federal Reserve Bank 

of New York hosted three nonpublic sessions under the Fed Listens moniker; these sessions were with existing advisory groups and 

were not livestreamed, although minutes were produced for each session and can be found on the Bank’s website at https://www.

newyorkfed.org/aboutthefed/fed-listens.
3

Part 1: The Fed Listens Initiative

Fed Listens Events, February–October 2019

Federal Reserve host 

(location, if different 

from that of host) and 

event month and day

Format Participants Questions

1. Dallas 

Feb. 25

Listening session 

with presentations 

by community 

groups

Community tour and 

visit to nonprofit 

organization and 

school

Representatives of education, 

workforce development, 

senior citizens, food security, 

transportation, health care, and 

affordable housing

Participants’ presentations 

prepared on the basis of 

questions about the labor 

market, inflation, and interest 

rates

2. Minneapolis

Apr. 9−10

2 research panels

2 policy panels

1 community panel

Researchers from academia, think 

tanks, and the Fed

Representatives from Minnesota 

nonprofits, government, and 

community organizations

Framing question for research 

and policy panels: What does 

the Fed need to know about 

how different households fare 

over the business cycle and 

under alternative monetary 

policy actions?

3. Richmond

May 8

1 community panel Representatives from Goodwill 

Industries, a community 

foundation, a food-processing 

company, and a professional 

services firm

Large audience from a convening 

of one of the Bank’s communitybased leadership programs

Questions on effects of 

monetary policy, the labor 

market, wage and price 

increases, effects of inflation 

on low- and moderate-income 

households, effects of targeting 

higher inflation to make up for 

missing the 2 percent objective, 

emerging community issues, 

and Fed communications

4. Boston 

May 13

3 community panels Representatives of lower-income 

groups, minority groups, small 

business, and retirees

Questions on costs and 

benefits of the current tight 

labor market, the importance 

of low unemployment versus 

stable prices, effects from the 

long period of low interest 

rates, costs when interest rates 

change, and the Fed’s success in 

achieving its dual mandate over 

the past 10 years

5. Philadelphia

May 17

2 community panels

Visit to business

and school in 

Camden, N.J.

Representatives of lower-income 

groups, small business, and 

higher education

Questions on current economic 

conditions, labor markets, 

the importance of maximum 

employment versus stable 

prices, the transmission of 

monetary policy to everyday 

activity, and how the Fed could 

do a better job
4

Fed Listens | Perspectives from the Public

Federal Reserve host 

(location, if different 

from that of host) and 

event month and day

Format Participants Questions

6. New York 

May 20

1 community panel Large number of labor 

and nonprofit leaders, 

local government officials, 

congressional district staff, and 

regional academics from the 

Second District

Participants from Puerto Rico

Questions on the importance 

of dual-mandate goals and 

whether one goal is more 

important than the other, 

costs and benefits of running 

a tight labor market, current 

labor market conditions, the 

transmission of monetary policy 

to the broader economy, and 

Fed communications

7. Chicago 

System research 

conference 

June 4−5

7 research panels

2 community panels

Researchers from academia and 

think tanks

Economists from the private 

sector

Representatives from workforce 

development, higher education, 

AARP, CDFIs, small business, and 

the AFL/CIO

Panel 1 questions on current 

economic conditions, the 

labor market, and Fed 

communications

Panel 2 questions on interest 

rates and the transmission 

of monetary policy, credit 

availability, inflation, and Fed 

communications

8. Cleveland 

(held in Cincinnati)

June 21

Final session of 

large community 

development 

conference

Conference attendees asked to 

discuss two questions by table

What does the employment 

picture look like in low- and 

moderate-income communities 

that you know and/or serve?

How has inflation been affecting 

the low- and moderate-income 

communities you know and/or 

serve?

9. Atlanta

(held in Augusta) 

July 16

2 community panels

Visit to business in 

Augusta

Representatives from a local 

manufacturing firm, workforce 

development, a public school 

system, a regional bank, a 

regional credit union, and a local 

housing authority

Panel 1 questions on current 

economic conditions, the labor 

market, inflation, and Fed 

communications about inflation

Panel 2 questions on current 

economic conditions, the 

cost and availability of credit, 

interest rates, inflation, and Fed 

communications about inflation

10. St. Louis 

Sept. 4

Deliberation on 

questions by 

advisory councils, 

which report back to 

policymakers

Members of the Bank’s advisory 

councils: Agribusiness Industry 

Council, Community Depository 

Institutions Advisory Council, 

Community Development 

Advisory Council, Health 

Care Industry Council, Real 

Estate Industry Council, and 

Transportation Industry Council

Common questions on the labor 

market, inflation, interest rates, 

and communications and the 

role of the Fed

Fed Listens Events, February–October 2019 (continued)
5

Part 1: The Fed Listens Initiative

Federal Reserve host 

(location, if different 

from that of host) and 

event month and day

Format Participants Questions

11. San Francisco 

Sept. 26

1 research speech

1 research panel

2 community panels

1 closing address

Researchers from academia, think 

tanks, and the Fed

Representatives from regional 

workforce development, 

government, community 

organizations, and business

Research speech and panel on 

benefits and potential costs of a 

“hot economy”; closing address 

on income inequality

Panel 1 questions on current 

economic conditions, the tight 

labor market, and opportunities 

for advancement

Panel 2 questions on how 

companies and employees 

have responded to the long 

expansion and tight labor 

market

12. Board of 

Governors

Oct. 4

2 community panels Representatives from CDFIs, 

AARP, small business, 

manufacturing, gig workers, 

workforce development, and a 

community college

Panel 1 questions on the 

labor market and Fed 

communications

Panel 2 questions on inflation, 

interest rates, and Fed 

communications

13. Kansas City 

Oct. 9

1 community panel Representatives from local 

business, labor, CDFIs, and lowand moderate-income groups

Questions on labor market 

conditions, wages and prices, 

broad economic conditions, 

and constraints on cultivating 

improved economic outcomes

14. Chicago

Oct. 17

2 community panels Representatives from workforce 

development, the AFL-CIO, a 

community college, community 

organizations, housing groups, 

and CDFIs

Panel 1 questions on labor 

market conditions and 

effects of monetary policy on 

disadvantaged workers’ longterm labor market prospects

Panel 2 questions on effects of 

monetary policy on low- and 

moderate-income communities’ 

housing and small businesses

Update,

Board of 

Governors

May 21, 2020

1 community panel Representatives from workforce 

development, the AFL-CIO, a 

community college, affordable 

housing, AARP, small business, 

and community financial 

institutions

Questions for each panelist on 

how conditions changed in their 

communities with the spread of 

COVID-19 in the United States

Note: CDFI is community development financial institution; AFL-CIO is American Federation of Labor and Congress of Industrial 

Organizations; COVID-19 is coronavirus disease 2019.

Source: Fed Listens event summaries presented in Part 2 of this report.

Fed Listens Events, February–October 2019 (continued)
6

Fed Listens | Perspectives from the Public

Takeaways from Fed Listens

While the Fed Listens events covered a broad range of topics, participants consistently highlighted 

a few points. First, participants representing underserved communities generally saw the tight 

labor market in 2019 as offering significant benefits to their constituents—the main one being job 

opportunities for individuals who had difficulty finding employment in the past. These participants 

frequently noted that the national statistics were not representative of their own communities, 

where unemployment rates were still high. More pointedly, some participants questioned the 

characterization of labor market conditions as “hot” in light of the still high unemployment in their 

communities. For example, at the Chicago Fed in October, one panelist representing a workforce 

development agency questioned whether the term “full employment” characterized the state 

of the labor market for all workers, stating that in some neighborhoods where unemployment is 

persistently high—between 15 and 17 percent—“it’s always a recession.”4 Similarly, participants 

from Puerto Rico at the New York Fed’s event in May characterized unemployment in the territory 

as “unbearable.”5

In addition, many participants expressed concern about what would happen to the newly hired in 

their communities during the next downturn, commenting that these workers would be the first 

to lose jobs without having had the chance to develop adequate work experience. Participants 

also frequently mentioned childcare and transportation as critical for sustaining employment, 

but generally inadequate in lower-income communities. For example, at the Dallas Fed event in 

February, participants discussed the importance of reliable transportation and proper nutrition 

in sustaining labor force attachment. At the Kansas City Fed in October, one participant from a 

workforce development agency saw the incompatibilities in schedules for training, employment, 

and childcare as the primary barriers that keep many individuals in poorer communities from 

joining the labor force.

Second, small business owners and representatives from organizations of small businesses and 

manufacturing firms (National Federation of Independent Business and National Association 

of Manufacturers, respectively) saw the tight labor market conditions as presenting difficulties 

in terms of finding qualified workers to fill available positions. Some strategies for bringing 

workers into the labor force entailed modification of requirements for education or training.

These business representatives, along with other participants from workforce development 

and educational organizations, offered anecdotes about newly developed training programs 

or specialized curriculums at community colleges tailored to build specific skills for newly hired 

employees. For example, at the System research conference in June, the president of a large 

community college system described a partnership with a sizable professional services company 

that provides employment for students during and after completion of a specially designed 

associate’s degree program. In partnering with the community college, the company had agreed 

to reduce the education prerequisite for its positions from a bachelor’s to an associate’s degree.

6

At a site visit to a Camden-based manufacturer that was part of the Philadelphia Fed’s event in 

4 The quoted text is from the Chicago Fed’s event in October 2019, which is summarized in Part 2 of this report.

5 Puerto Rico is excluded from the labor market statistics produced by the Bureau of Labor Statistics. The quoted text is from the New 

York Fed’s event in May 2019, which is summarized in Part 2 of this report.

6 Some participants at the events asked whether the current U.S. education system provides appropriate skills and training, at times 

questioning the value of a four-year bachelor’s degree as compared with a well-designed two-year associate’s degree.
7

Part 1: The Fed Listens Initiative

May, the firm’s management described an after-hours training program that provided employees 

with an opportunity to earn specialized welding certifications. These certifications could add 

measurably to the wages that the firm’s welders—most of whom did not have postsecondary 

education—were earning, and the program was seen as boosting loyalty to the firm.

A related strategy that businesses were using to bring workers on board was broadening the set 

of individuals that they deem qualified for available jobs. At the Richmond Fed’s event in May, 

a representative of Goodwill Industries commented, “As the unemployment rate goes down, 

employers are forced to look at potential workers they might not have considered previously.”7

A participant at the Boston Fed’s event noted that his manufacturing firm was looking for workers 

in less-common markets and had begun partnering with local prisons to recruit former inmates 

who had taken STEM (science, technology, engineering, and mathematics) training during their 

incarceration. The broadening of recruiting efforts to include the formerly incarcerated surfaced 

at a number of the events, as did the relaxation of drug-testing requirements for some positions.

Other aspects of workforce flexibility included encouraging longtime employees to postpone 

retirement and asking retired employees to return to work.

Third, by and large, business participants did not report raising wages as a means of attracting and 

retaining workers in what they saw as tight labor markets. Instead, these participants frequently 

reported having to absorb increased costs associated with training programs, health care, or other 

benefits. For example, at the St. Louis Fed’s event in September, members of the Bank’s industry 

and advisory councils reported that local labor shortages were leading them to offer enhanced 

retirement and health-care packages, additional vacation days, more generous parental leave 

policies, college-tuition reimbursement programs, increased flexibility around work schedules and 

telework, or a combination of those benefits. Panelists at the San Francisco Fed in September 

spoke of a growing emphasis on workplace culture, claiming that employment conditions and 

benefits are increasingly viewed as viable substitutes for higher wages.

Fourth, when asked about the effects of changes in interest rates, participants representing 

underserved populations said the question was not applicable to most members of their 

communities, because many have limited or no access to conventional credit. Populations in 

lower- and middle-income communities have traditionally been more susceptible to predatory 

lending; those with poor credit histories have been precluded from taking advantage of low 

interest rates. While businesses and CDFIs generally found the low interest rate environment 

beneficial, representatives of retirees conveyed a more negative view of low interest rates given 

the reliance of some of the members of their constituency on savings income.

Fifth, there was less discussion at the Fed Listens events of inflation than there was of labor market 

conditions. Participants generally acknowledged that inflation was low and posed few challenges.

Representatives of small businesses or business associations emphasized the importance of low, 

stable, and predictable inflation for planning and decisionmaking. Participants representing the 

retired or those living on fixed incomes mentioned health-care costs in the context of inflation.

For example, an AARP executive at the Board’s event in October noted that about half of 

Americans over the age of 65 live exclusively or primarily on income from Social Security, making 

price stability especially important for their financial well-being. The relatively rapid increases in 

7 The quoted text is from the Richmond Fed’s event in May 2019, which is summarized in Part 2 of this report.
8

Fed Listens | Perspectives from the Public

the costs of health care and prescription drugs were noted as a particular concern. In addition, 

participants at the Cleveland Fed’s event in Cincinnati in June and at several other events 

observed that residents of low- and middle-income communities were particularly sensitive to 

increases in the cost of necessities such as health care, housing, utilities, groceries, and childcare, 

which account for the bulk of their spending. As one panelist at the System research conference in 

Chicago put it, “It’s expensive to be poor in America.”8

When discussion turned to the possibility that the Fed might want to nudge inflation higher—

which occurred at a few of the events—participants generally had little understanding for why 

policymakers would be concerned about inflation running below the Federal Reserve’s 2 percent 

objective. At the Board’s event in October 2019, participants noted that work must be done to 

explain why the Fed would want to achieve somewhat higher inflation, especially to communities 

that often do not see their wages keep up with prices.

Finally, at most of the events, participants were offered the opportunity to comment on Federal 

Reserve communications with the public. While they expressed appreciation for the institution’s 

willingness to engage with the public during the review process, participants generally thought 

the Fed should do more, and on a more regular basis, to reach people around the country. In this 

regard, the work that community affairs and community development teams within the System 

do to address workforce development, education, and housing issues was acknowledged as 

important and valuable. In addition, the research of System economists—whether or not that 

research bears directly on the dual-mandate goals or on broader economic questions—was seen 

as contributing important analysis to the public discussion of key economic issues.

A uniform message delivered by participants across the events was that the Federal Reserve 

should tailor its communications appropriately to different audiences and strive to communicate 

more clearly and simply with the general public. Participants advised policymakers to avoid 

using technical jargon, such as “maximum employment and price stability,” and instead employ 

language and reasoning that the average person can understand.

Policymaker Discussions

Following the conclusion of the Fed Listens events in October, policymakers considered the 

views offered at the events together with staff analysis on the distributional effects of monetary 

policy at their December 2019 meeting. Key points from their discussion were summarized in 

the minutes of that meeting: Policymakers agreed that the Fed Listens outreach efforts had 

informed their understanding of the goals and tradeoffs associated with monetary policy and 

had provided highly useful input into their deliberations.

9

 Several of them voiced their desire to 

continue the conversations initiated at the Fed Listens events. In addition, policymakers shared 

their appreciation of the feedback they receive on a regular basis from members of the public, 

including through the Federal Reserve System’s extensive networks of contacts and community 

outreach efforts.

8 The quoted text is from the second panel session at the System research conference in June 2019; the session is summarized in Part 2 

of this report.

9 The minutes of the Federal Open Market Committee’s December 2019 meeting are available on the Monetary Policy portion of the 

Board’s website at https://www.federalreserve.gov/monetarypolicy.htm.
9

Part 1: The Fed Listens Initiative

Policymakers generally saw the feedback from the Fed Listens events as reinforcing the 

importance of sustaining the economic expansion so that the effects of a persistently strong job 

market reach more of those who, in the past, had experienced difficulty finding employment.

Some policymakers pointed to the challenges associated with assessing the maximum level of 

employment. A few of them noted that the aggregate statistics mask significant heterogeneity 

in labor market outcomes, while a few others pointed to the continued absence of significant 

wage and price pressure—traditionally seen as a symptom of a tight labor market—even as 

the unemployment rate had moved below most estimates of its longer-run level. Finally, a few 

policymakers raised the possibility that the maximum sustainable level of employment had 

increased as the U.S. economic expansion continued to draw in workers who would otherwise not 

be in the labor force.

Regarding inflation, policymakers recognized that segments of the public generally do not regard 

the fact that aggregate inflation is running modestly below the Committee’s 2 percent goal as 

a problem. Many of them warned about the macroeconomic consequences of not achieving 

2 percent on a sustained basis. In particular, if inflation ran persistently below the Committee’s 

objective, longer-term inflation expectations could drift down, resulting in lower actual inflation.

With lower inflation, nominal interest rates would be lower as well and therefore closer to zero.

As a result, the scope for monetary policy to support the economy in a future downturn through 

interest rate cuts would be reduced, a situation that would likely worsen economic outcomes for 

households and businesses.

In light of these considerations, policymakers generally agreed that they need to communicate 

more clearly to the public their rationale for, and commitment to, achieving 2 percent inflation 

on a sustained basis and ensuring that longer-run inflation expectations are anchored at levels 

consistent with this objective. To ensure the effectiveness of these and other communications, 

several policymakers stressed that the Federal Reserve needs to adapt its communications to 

various audiences.

11

PART 2: EVENT SUMMARIES

Federal Reserve Bank of Dallas

The Federal Reserve Bank of Dallas held a Fed Listens community listening session February 25 at 

St. Philip’s School and Community Center in southern Dallas. 10 The event was hosted by Federal 

Reserve Vice Chair Richard Clarida and Dallas Fed President Robert Kaplan.

11

The neighborhood surrounding St. Philip’s, commonly known as South Dallas, is historically 

underserved and faces many economic challenges (see the box “Community Snapshot”on 

page 13). These were highlighted during a brief community tour to provide context for the 

discussion. The tour included a stop at CitySquare, a nonprofit that provides social services, 

economic opportunity and workforce programs, and affordable housing solutions.

12

The listening session featured speakers from nonprofit organizations active in the neighborhood 

(see “Session Speakers” later in this summary). The organizations were selected to represent areas 

of focus significant to the South Dallas community:

• Education

• Workforce development

• Financial security/older adults

• Food security

• Transportation

10 Additional information on the Fed Listens initiative is available on the Board’s website at https://www.federalreserve.gov/

monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-fed-listens-events.htm.

11 More details about the event can be found on the Dallas Fed’s website at https://www.dallasfed.org/cd/events/2019/19clarida.aspx.

12 For additional information, see the CitySquare website (https://www.citysquare.org).
12

Fed Listens | Perspectives from the Public

• Health

• Affordable housing

Each speaker presented prepared remarks, responding to questions provided by the Dallas Fed.

The questions supported the Federal Reserve’s review of monetary policy strategy, tools, and 

communications.

13

Observations on Jobs, Inflation, and Interest Rates

The speakers offered a number of perspectives that connect with the Fed’s monetary policy goals 

of full employment and stable prices. Reflecting the high unemployment rate in South Dallas, 

speakers cited the negative effect of unemployment on all aspects of community life—health, 

nutrition, education, housing, access to credit, and more. Additionally, they emphasized the 

limitations of employment in South Dallas. Most opportunities there are low-quality, low-wage 

jobs, they reported, and many employed residents are among the “working poor,” struggling to 

make ends meet on low hourly wages.

Tahvia Merrill of Miles of Freedom elaborated. “It’s not good enough to ask if the people I serve 

have the ability to ask for higher hourly wages,” she said. “Taking an individual from $8 an hour to 

$10 an hour is not going to substantially impact their quality of life.”

Concerns about inflation were expressed especially with regard to older adults, many of whom 

are living on fixed income—often Social Security alone—without savings. For this growing 

demographic, Steve Benton of the Senior Source noted, stable prices are “crucial.” With people 

living longer, they face more years in retirement on a fixed income, making inflation a threat to 

their financial viability as their fixed-income buying power declines over time. Moreover, Benton 

said, seniors experience a higher inflation rate than that of the overall economy because of their 

higher expenditures on health care.

Other concerns about rising prices related to pressures on housing costs due to encroaching 

gentrification.

Perspectives on interest rates came from discussions of access to credit and the cycle of debt in 

this asset-poor community. Credit issues affect housing affordability even in an environment of 

lower interest rates, Chris Simmons of Cornerstone Baptist Church observed. Many South Dallas 

residents have poor credit (credit scores of 525 or less) and are vulnerable to predatory lending, 

accessing loans only at extremely high interest rates.

With interest rates now rising, Shaylon Scott of On the Road Lending suggested, performance 

on auto loans is starting to deteriorate, placing borrowers further at risk. An individual’s credit, 

once destroyed, can take a decade or more to rebuild, Scott said—noting that some South Dallas 

residents are still trying to rebuild their credit following the recession.

13 More details about the review are provided on the Board’s website at https://www.federalreserve.gov/monetarypolicy/review-ofmonetary-policy-strategy-tools-and-communications.htm.
13

Part 2: Event Summaries | Federal Reserve Bank of Dallas

Key Concerns from Session

In addition to observations regarding jobs and inflation, the speakers emphasized three key 

concerns: transportation, location of job opportunities, and the need for investment in the 

community. Lack of access to affordable, reliable transportation, they noted, impedes access 

to jobs, educational opportunities, grocery stores, social services, and health care—making it a 

primary obstacle to economic opportunity, financial security, and overall well-being.

Another issue highlighted was the relative scarcity of jobs in South Dallas. Simmons reported that 

less than 1 percent of jobs in Dallas are in the South Dallas neighborhood, and few of those jobs 

provide a living wage. High-opportunity jobs, several speakers noted, are generally located in 

distant parts of the metropolitan area, necessitating a lengthy commute.

To address the community’s economic issues, the speakers pointed to the need for investment 

in many areas, including education, business development, entrepreneurship, infrastructure, 

affordable housing, health, and community resources. In particular, investment in building new 

affordable housing was identified as a critical need—a type of infrastructure, Simmons noted, vital 

to long-term economic and community health.

Community Snapshot

The area of southern Dallas featured (Zip codes 75210, 75215, and 75216) is historically 

underserved and faces many economic challenges.

• The heavily minority population (60 percent African American and 36 percent Hispanic) 

has a poverty rate of 37 percent and child poverty rate of 49 percent, with 77 percent of 

households earning less than $50,000 annually.

• Twenty-nine percent of the population does not have health insurance.

• The unemployment rate is high (10 percent), and education levels are low—35 percent of 

adults lack a high school diploma, and only 8 percent have a bachelor’s degree or higher.

• Homeownership rates are low, and the limited housing stock is aging and deteriorating.
14

Fed Listens | Perspectives from the Public

Session Speakers

Community Overview/Education

Kellee Murrell, St. Philip’s School and Community Center

St. Philip’s School provides college preparatory education for grades pre-K 

through 6.

14 The Community Center provides social services and resources that assist 

neighborhood families in enhancing their quality of life.

Providing an overview of economic and educational concerns in South Dallas, Kellee 

Murrell of St. Philip’s School identified poverty as the underlying issue.

15 Residents 

“have the desire to change their community [and] living situation,” she said. “But 

they lack the financial resources and, in some cases, the knowledge and opportunity to move out of their 

current state.”

In South Dallas, Murrell said, 94 percent of students are economically disadvantaged. As an educator, she 

said, the goal is closing not just the achievement gap, but also the opportunity gap and income gap. “South 

Dallas residents are confronted with the reality that quality jobs are not in their neighborhood. They don’t 

have equal access to opportunities that their wealthier peers have.”

Observing that the financial circumstance into which students are born affects their future success, Murrell 

said, “To improve the livelihood of our children, we have to improve the livelihood of their parents.” The 

greatest need, she said, is investment and restructuring. “The need in South Dallas ... is the intentional 

financial investment toward education in order to lift someone out of poverty.”

Asked about the greatest constraint on education and economic progress, Murrell identified financing for 

after-school programs and transportation as critical needs—noting that interventions and instruction are not 

effective if children cannot get home afterward.

Workforce Development

Tahvia Merrill, Miles of Freedom

Miles of Freedom supports individuals and families affected by incarceration and 

helps men and women coming out of prison rebuild their lives through housing, 

employment, and other opportunities.

16

Observing that Dallas has one of the highest concentrations of poverty in the nation, 

Tahvia Merrill of Miles of Freedom said the South Dallas community has remained 

resilient through entrepreneurship, trading goods and services within the community.

17

She noted the question of how to leverage employment opportunities and foster economic opportunity.

South Dallas has both land and a labor force, Merrill said: “185 square miles of prime property” and “tens of 

thousands of people who are ready, willing, and able to go to work.” Citing the need for capital, she noted 

the difficulty of producing capital in a community that is largely asset poor. “We must work with the people 

in the community through investments, development, and entrepreneurship to lead to economic growth.”

14 Additional information is available on the St. Philip’s School and Community Center website at https://www.stphilips1600.org.

15 A video of Murrell’s remarks is available on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.be&t=864.

16 More details can be found on the Miles of Freedom website at http://milesoffreedom.org.

17 A video of Merrill’s remarks is available on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.be&t=1363.
15

Part 2: Event Summaries | Federal Reserve Bank of Dallas

Commenting on the employment landscape in South Dallas, Merrill stressed the need for higheropportunity jobs with living wages and benefits. “It’s not good enough to ask if the people I serve have the 

ability to ask for higher hourly wages,” she said. “Taking an individual from $8 an hour to $10 an hour is not 

going to substantially impact their quality of life.”

She further emphasized that quality employment opportunities should be located within the local 

community. “We are not going to shift until changes are made in development, in investment, and our 

residents aren’t required to make a one-way, three-hour commute by train and bus to travel 30 miles ... for a 

chance at substantial employment.”

Merrill called for investment in both the land and the people of South Dallas and for empowering residents 

to build businesses that would allow and encourage them to spend money in their own neighborhood.

Alongside workforce development programs, she said, there is a need to engage corporations and 

investments, creating opportunities, entrepreneurship, and capital to keep the momentum moving forward

Financial Security/Older Adults

Steve Benton, Elder Financial Safety Center, the Senior Source

As a collaborative partnership between the Senior Source and the Dallas County 

Probate Courts and District Attorney’s Office, the Elder Financial Safety Center helps 

older adults avoid the dangers of financial uncertainty and exploitation.

18

Steve Benton of the Senior Source discussed economic and financial challenges of 

older adults in South Dallas, a key service demographic for his organization, and 

across the United States, where 78 million baby boomers are coming into retirement.

19

Financial viability and financial vulnerability are gateway issues for their safety and security, he said, affecting 

where they can live, what they can afford, and whether they have access to transportation and services. He 

cited four key risks: longevity, inflation, health care, and exploitation.

Explaining longevity risk, Benton said, “The biggest fear of the older adult is, surprisingly, not death—it’s 

running out of money.” With people living longer, they face more years in retirement on a fixed income. This 

leads to inflation risk, as “their fixed-income buying power shrinks as the cost of everything they need to live 

rises over time.”

Further, the inflation rate experienced by seniors is higher than that of the overall economy due to higher 

expenditures on health care—13 percent of expenditures by Americans over the age of 65, compared with 

5 percent for other age groups. Health-care inflation, Benton noted, historically has risen at double the 

general inflation rate. Due to these risks, he said, price stability is “crucial.”

Several factors increase financial vulnerability, Benton said. For seniors in South Dallas, Social Security is 

often the only source of income. More generally, many baby boomers are entering retirement still owing 

mortgages, and some older seniors turn to reverse mortgages, which consume home equity, when they 

need money for basic expenses.

Older adults are also at risk for financial exploitation by scammers, businesses, family members, caregivers, 

and friends. Citing the example of an 83-year-old South Dallas man who went to a dealership for an oil 

change and was sold a new car with a “subterranean prime” loan, Benton said older adults are “vulnerable 

to predatory lending, payday loans, and title loans with extraordinary fees and interest.” It is not uncommon, 

18 For additional information, see the Elder Financial Safety Center website (https://theseniorsource.org/elder-financial-safety-center).

19 A video of Benton’s remarks is available on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.

be&t=1812.
16

Fed Listens | Perspectives from the Public

he said, to find 80-year-olds with over $25,000 in credit card debt, able to make minimum payments only, 

with no hope of ever paying it off.

Asked what percentage of his clients have no savings at all, Benton said, “A majority of South Dallas 

[seniors] do not have any savings, nothing to fall back on. Sometimes they own their house.”

Food Security

Sara Gorath, North Texas Food Bank

North Texas Food Bank is a hunger-relief organization that distributes donated, 

purchased, and prepared foods through a network of more than 200 partner agencies 

in 13 counties.

20 It operates a community food pantry at St. Philip’s.

The level of food insecurity in South Dallas, Sara Gorath of North Texas Food Bank 

said, “is one of the highest in our service areas.”21 She identified the neighborhood 

as a “food desert” with limited access to grocery stores or fresh produce. Many of 

the food bank’s clients, primarily seniors and disabled adults, access most of their groceries at a local 

convenience store.

In broad economic terms, Gorath said, “here in South Dallas ... hunger is a symptom of a much larger 

problem.” Many clients face multiple barriers that limit their access not just to food, but also to a wide range 

of resources, social services, and benefits. This can affect both their health and their economic security, she 

noted. Transportation is a challenge, especially for people in wheelchairs, she said, and many people lack 

mobile phones or computers—or even utensils to be able to cook.

“Getting a few blocks just to our pantry down the street can be really challenging,” Gorath said. “So 

knowing that and understanding, we’ve been able to gather a lot of information about what our clients need 

and how to better partner with other community agencies to provide wraparound services.” Clients coming 

to the pantry can enroll in supplemental nutrition and other benefit programs, access health education and 

services, and get referrals to other resources.

Asked the extent to which South Dallas is underserved in terms of food pantries, Gorath said distribution 

and access are the main issues, citing the need for transportation and awareness of resources. Asked about 

constraints to expansion, she identified a need for more space, noting that “the need in South Dallas ... is 

so large that, just last week, we enrolled 30 new clients.”

Transportation

Shaylon Scott, On the Road Lending

On the Road Lending provides vehicle selection assistance and long-term financial 

mentoring to help low-income individuals and families overcome transportation 

barriers so they can get to work and avoid predatory lending.

22 It helps people improve 

their credit and purchase fuel-efficient, reliable cars, financing them through a privateequity loan fund with a low-cost loan.

20 For more details, see the North Texas Food Bank website (https://ntfb.org).

21 A video of Gorath’s remarks is available on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.

be&t=2385.

22 Additional information about On the Road Lending is available on the organization’s website at https://www.ontheroadlending.org.
17

Part 2: Event Summaries | Federal Reserve Bank of Dallas

Shaylon Scott of On the Road Lending highlighted the roles of transportation and vehicle ownership in 

improving the economic situation of individuals and families.

23 Transportation, she said, is “the engine that 

drives our ability to work, to go to school, to get to the grocery store, to maintain our lives.”

The Dallas metro area is geographically vast and expanding rapidly, Scott said, and it has a spatial 

mismatch—with lower-income families and higher-opportunity jobs in different areas. Mass transit does not 

serve all of the area, making vehicle ownership important. “We can overcome food deserts ... employment 

gaps, lack of access ... simply if people have a way to get there.”

A vehicle can be a key asset for low-income families, she said, if it is not too costly to own and maintain. In 

South Dallas and similar communities, asset poverty is “a huge barrier.” Scott’s organization helps people 

acquire affordable, reliable vehicles and avoid predatory lending—to rebuild their credit and get out of the 

cycle of poverty and debt. From this perspective, she said, “we are keenly interested in how the actions of 

the Fed impact access to credit and interest rates.”

People in South Dallas who want to buy a car, Scott said, are often vulnerable to predatory lending at “tote 

the note” lots that charge up to 27 percent interest. Many residents have poor credit (credit scores of 525 or 

less) and believe this is their only option. In addition, interest rates are rising, and 7 million Americans are 

90 days or more past due on their auto loans, she said. “As people’s performances are starting to 

deteriorate, their credit is deteriorating ... so we need to give them the opportunity to have credit-building 

loans.”

Credit can be destroyed overnight, Scott said, but can take a decade or more to rebuild. In South Dallas, 

“even though it’s been seven years since the recession, we still have neighbors that are struggling to rebuild 

their lives, their credit.” Elsewhere in Texas, people are working to rebuild their credit after Hurricane Harvey.

Helping people overcome poor financial choices or catastrophic events, she said, “can save them not just 

money, but struggle over the lifetime of their loans.”

Asked how her organization addresses these issues, Scott said it helps “people traditional banks are unable 

to help” by providing wraparound services—financial education, coaching and mentoring, and loans 

through a designated CDFI with a consistent interest rate of 9.75 percent.

Health

Donald Wesson, Baylor Scott & White Health and Wellness Center at the Juanita J.

Craft Recreation Center

Baylor Scott & White Health, the largest not-for-profit health-care system in Texas, 

includes 48 hospitals and more than 800 patient care sites.

24 It operates clinics in South 

Dallas, including one soon to open at St. Philip’s.

Donald Wesson of Baylor Scott & White Health highlighted the distinction between 

health and health care, emphasizing that health depends on a “health recipe” of three 

factors: health care, healthy nutrition, and healthy physical activity.

25 Health care contributes only about 

20 percent to overall health, with 60 percent contributed by correctable environmental factors such as 

nutrition and physical activity. The lack of investment in an infrastructure that provides these supporting 

elements, Wesson said, is devastating to the health of impoverished communities.

23 A video of Scott’s remarks can be found on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.

be&t=2888.

24 More details can be found on the Baylor Scott & White Health website at https://www.bswhealth.com/locations/health-and-wellnesscenter.

25 A video of Wesson’s remarks is available on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.

be&t=3507.
18

Fed Listens | Perspectives from the Public

In South Dallas, he said, poverty limits access to all three “ingredients” of the health recipe. Lack 

of transportation is also an issue, limiting the ability of residents to get to existing facilities in the 

neighborhood. Solutions to address this include encouraging non-health-care entities to co-invest with 

health-care entities to provide complementary services and resources in one location.

There are already successful models for this in South Dallas, Wesson said—for example, locating a clinic 

in a city recreation center. He called for additional investment in these existing models. “This investment 

will yield improved health in our community that will then allow individuals to contribute to the economic 

viability of their families, of their communities, and of our city and state.”

Wesson cited unemployment as a key economic factor that affects community health. “Unemployment 

contributes in a mighty way, and ... unemployment is a real challenge in our community.” High 

unemployment, he said, limits access to employer-based insurance that can finance health care, while also 

limiting the funds available to purchase health services. Increased unemployment also increases poverty, he 

said, further limiting access to all of the resources that support health for South Dallas residents.

Asked how Dallas is doing compared with other U.S. cities in supporting the health ecosystem, Wesson 

pointed to the opportunity to overlay health-care and nutrition services at the city’s 43 recreation centers.

He reiterated the need for investment, noting interest from for-profit companies that want to reduce 

absenteeism.

Affordable Housing

Chris Simmons, Cornerstone Baptist Church and Community 

Development Corporation

Cornerstone Community Development Corporation (CDC) leads community 

development and revitalization efforts in blighted areas of South Dallas/Fair 

Park.

26 In partnership with the City of Dallas, Cornerstone CDC has purchased 

abandoned properties for use in building new affordable homes.

South Dallas has a great need for new, affordable homes, said Chris Simmons of Cornerstone 

Baptist Church.

27 Describing the housing landscape, he highlighted the effect of population loss, 

poverty, aging housing stock, and outdated infrastructure.

Since the 1970s, Simmons said, there has been a “hemorrhage” of residents. The population 

has declined more than 54 percent, he said, resulting in a large amount of vacant land (70 to 

80 percent in some areas) and erosion of the tax base. Median household income in South Dallas 

is below the state average, and median house value is significantly below average, while housing 

age is significantly above average, with the majority of homes built before 1939.

Economic growth in the region has led to expansion of Dallas’s central business district, bringing 

new interest in purchasing homes in close-in, formerly blighted, and neglected neighborhoods 

such as South Dallas. But rising costs can push current residents out, Simmons said. “In the name 

of urban renewal, many people hear urban removal.” New, less-affordable development drives up 

26 For additional information, see the Cornerstone Baptist Church website (http://www.cornerstonedallas.org).

27 A video of Simmons’s remarks is available on YouTube at https://www.youtube.com/watch?v=-N988TWC1_o&feature=youtu.

be&t=4113.
19

Part 2: Event Summaries | Federal Reserve Bank of Dallas

tax values in the area, he noted, creating challenges for seniors who own their homes but live on 

tight budgets. Prices of existing homes are also rising.

Credit issues further affect affordability, Simmons said, even in an environment of lower interest 

rates. Many individuals in the community do not have access to credit, he said, with some entering 

adulthood with their credit already damaged—for example, due to parents using a child’s Social 

Security number to turn on utilities and then not paying the bills.

Simmons cited the job market as a key factor influencing access to housing for South Dallas 

residents. “In our neighborhoods, we have very few jobs available that provide a livable wage.” 

Only 1 percent of Dallas jobs are located in South Dallas, he said, and unemployment among 

residents is high; a 2012 study found a 16.5 percent unemployment rate in South Dallas, compared 

with 5.1 percent in the Dallas–Fort Worth area. He added that many residents are among the 

“working poor,” who work many hours but struggle to make ends meet.

Simmons advocated a view of affordable housing as infrastructure, vital to long-term economic 

and community health.
20

Fed Listens | Perspectives from the Public

Federal Reserve Bank of Minneapolis

On April 9 and 10, the “Fed Listens: Distributional Consequences of the Cycle and Monetary 

Policy” conference was held at the Federal Reserve Bank of Minneapolis. It was one in a series of 

Federal Reserve Board of Governors outreach sessions to broadly review the strategy, tools, and 

communication practices the Board uses to pursue the monetary policy goals established by the 

Congress: maximum employment and price stability.

It served as the spring conference for the Opportunity & Inclusive Growth Institute, which is 

headquartered at the Minneapolis Fed.

Board Vice Chair Richard H. Clarida was the keynote speaker, with his remarks 

titled “The Federal Reserve’s Review of Its Monetary Policy Strategy, Tools, 

and Communication Practices.”28

The framing question for the research and policy panels 

was presented by Institute Director Abigail Wozniak, 

who asked: “What does the Fed need to know about 

how different households fare over the business cycle 

and under alternative monetary policy actions?”

The conference included research panels each composed of four formal 

30-minute presentations by economists followed by 30-minute question-andanswer sessions involving audience participants. After each of the research presentations, two 

other presenters then focused on related policy issues, also with a half-hour of audience questions.

The first day closed with a dinner speech by Vice Chair Clarida. The second day ended with a 

spirited panel discussion with a diverse group of community leaders.

What follows are excerpts from the panel participants.

29 A complete report on presentations and 

the extensive question-and-answer (Q&A) sessions is included in the full conference report.

Conference Agenda

Day One, April 9

Research Panel 1

Context: Trends and Driving Forces in U.S. Inequality

• Fatih Guvenen, University of Minnesota

The Great Micro Moderation

28 See Richard H. Clarida (2019), “The Federal Reserve’s Review of Its Monetary Policy Strategy, Tools, and Communication Practices,” 

speech delivered at “Fed Listens: Distributional Consequences of the Cycle and Monetary Policy,” a conference hosted by the 

Opportunity and Inclusive Growth Institute, Federal Reserve Bank of Minneapolis, Minneapolis, Minn., April 9, quoted text in 

paragraphs 3 and 11, https://www.federalreserve.gov/newsevents/speech/clarida20190409a.htm.

29 Videos of all of the panels and sessions, along with the slide decks of presenters, are available on the conference webpage at https://

www.minneapolisfed.org/events/2019/2019-spring-institute-conference.
21

Part 2: Event Summaries | Federal Reserve Bank of Minneapolis

• Greg Kaplan, University of Chicago

Monetary Policy, Markups, and Labor Market Inequality

• Moritz Kuhn, University of Bonn

Wealth and Income Inequality in America, 1949–2016

• Isabel Cairo, Board of Governors of the Federal Reserve System

Market Power, Income Inequality, and Financial Instability 

• Moderator, Abigail Wozniak, Director, Opportunity & Inclusive Growth Institute 

Policy Panel 1

• Aparna Mathur, American Enterprise Institute

Addressing Old and New Challenges in the Labor Market 

• Josh Bivens, Economic Policy Institute

The Progressive Benefits and Retreating Risks of High-Pressure Labor Markets 

• Moderator, Mark Wright, Senior Vice President and Research Director, Minneapolis Fed 

Dinner Keynote Address

• Introduction, Neel Kashkari, President, Federal Reserve Bank of Minneapolis 

• Richard H. Clarida, Federal Reserve Board Vice Chair

The Federal Reserve’s Review of Its Monetary Policy Strategy, Tools, and 

Communication Practices 

Day Two, April 10

Research Panel 2 

Heterogeneity: How Different Households Fare over the Business Cycle

• Alisdair McKay, Federal Reserve Bank of Minneapolis

Household Heterogeneity and Monetary Policy 

• Martin Schneider, Stanford University

Monetary Policy and the Revaluation of Debt 

• Hannes Schwandt, Northwestern University

Long-Term Impacts of Short-Term Fluctuations 

• Marianne Bitler, University of California–Davis

Cyclicality of Our Safety Net 

• Moderator, Jonathan Heathcote, Minneapolis Fed 

Policy Panel 2

• William Spriggs, Howard University

Questions I Hope the Federal Reserve Could Answer
22

Fed Listens | Perspectives from the Public

• Susan Houseman, Upjohn Institute

Independent Contract and Informal Work 

• Moderator, Alessandra Fogli, Minneapolis Fed

Perspectives from the Community

• Tawanna Black, Center for Economic Inclusion

• Myron Frans, Minnesota Management and Budget

• Michael Goze, American Indian Community Development Corporation

• Sean Kershaw, Wilder Foundation

• Gloria Perez, Jeremiah Program

• Moderator, Lee Schafer, Star Tribune (Minneapolis)

Day One: April 9, 2019

Research Panel 1

Context: Trends and Driving Forces in U.S. Inequality

Fatih Guvenen presented findings 

that, contrary to broad consensus, 

volatility in individual earnings and in 

firm employment have both declined

by about one-third since 1980. This 

calls into question theories based 

on the idea that volatility was rising.

Moreover, since income inequality has 

increased significantly, the volatility 

decline means unequal incomes are also more persistent, potentially because new cohorts 

are unequal when they enter labor markets. Income inequality among 25-year-old males 

tripled from 1970 to 2010. Cause is unclear; perhaps education. Separate observation: This 

micro moderation may be linked to well-known moderation in the macroeconomy.

Greg Kaplan discussed his model linking monetary policy, markups, and labor market 

inequality. He distinguished between “overhead” work (management, marketing, sales, and 

research and development) and “production” work. Overhead work creates new markets 

or product models, shifting demand curves outward by selling more without lowering 

product prices. Production work generates revenue by moving output along firms’ current 

demand curves. When markups (difference between price and cost) change—through a 

policy or aggregate demand shock—that shifts demand between these types of workers.

Changes in markups thus redistribute income between overhead and production labor. A 

rise in markups, for example, would reduce the share of labor income going to production 

workers and increase the share for overhead workers. Importantly, these observations apply 

equally to monetary and demand shocks. Takeaways: The aggregate effect of monetary 
23

Part 2: Event Summaries | Federal Reserve Bank of Minneapolis

policy depends on what workers are doing. And policy shocks have very different effects on 

consumption and labor income for production- and overhead-intensive jobs.

Moritz Kuhn described the joint evolution of U.S. income and wealth distribution from 

1949 to 2016. He noted an unprecedented rise in wealth inequality, driven in large part by 

asset price changes and differences in household asset portfolios. Equities and bonds are 

the primary portfolio holdings of the top 10 percent of the wealth distribution; housing is 

a small portion. The opposite holds for the bottom 90 percent. After the financial crisis, 

housing prices recovered slowly, but the stock market quickly. So wealth stagnated for the 

bottom 90 percent of households by wealth and soared for the top 10 percent. U.S. wealth 

dynamics have constituted a race between the stock and housing markets.

Isabel Cairo elaborated on research, concluding that increased market power in product 

and labor markets can explain five 40-year trends: declining labor share, rising profit share, 

rising income and wealth inequalities, rising household-sector leverage, and financial 

instability. Greater power in product markets has far more explanatory strength than in 

labor markets. Cairo also derived policy implications, finding that “carefully designed 

redistribution policies can be quite effective macroprudential policy tools.” 

Q&A 

Questions following these presentations concerned how these models would affect policy 

decisionmaking; policy implications of empirical findings on wealth distribution and market 

power; the importance of including labor as an asset affected by monetary policy; looking 

more carefully at how inequality is measured, especially among lower-earning or lowerwealth households; considering labor share as a business cycle indicator; valuation of 

self-owned businesses as capital or human capital; whether excessive focus on markups and 

market power distracts from other potential mechanisms of inequality; and clarifying the 

distinction between production and overhead work activity.

Policy Panel 1

Aparna Mathur spoke of challenges in the current 

labor market, noting that broad improvement 

in the aggregate employment picture hides 

significant heterogeneity. Blacks, Hispanics and 

Latinos, the very young, those 20 to 24 years 

old, and the disabled still experience high 

unemployment rates. Older workers are doing 

far better, but, as they retire, the problem will 

be to increase participation by others and make 

growth inclusive. Challenges include worker–job mismatch (skills, geography, and racial 

discrimination); boosting women’s labor force participation; assimilating those formerly 

incarcerated; and addressing barriers like residential segregation, lack of education and 

social networks, and opioid abuse. Declining male labor force participation is a particular 

concern. Policy should address skills, training, segregation, mismatches, education, and 

incarceration. Boosting income for low-wage workers through safety net programs is also 

critical.
24

Fed Listens | Perspectives from the Public

Josh Bivens spoke about high-pressure labor markets—the idea that higher economic 

growth improves job markets, especially for the least advantaged. He described the 

“progressive benefits” of high-pressure labor markets: faster wage growth for low- and 

middle-wage workers, erosion of racial gaps in employment-to-population ratios and hours 

worked, and potential declines in poverty. Moreover, potential risks of high-pressure labor 

markets, particularly inflation, are retreating: There is less “tinder” in productivity and wage 

growth, unemployment, and labor bargaining power. This scenario suggests absence of 

strong Phillips curve dynamics and that policymakers should pursue tighter labor markets to 

improve wage growth and promote more inclusive growth.

Q&A 

Questions focused on whether macroeconomic policy might be more effective than 

eliminating structural barriers from a cost–benefit standpoint, the role of structural 

barriers and macro policy in persistence of earnings shocks, possible asymmetry in the 

demographic effect of unemployment rate shifts, obstacles to apprenticeship programs in 

the United States, the possible link between the rise of the natural rate hypothesis and antiinflation bias, the effect of relative pay trends in manufacturing, and whether informal labor 

arrangements have fragmented the labor market and weakened labor’s bargaining power.

Dinner Keynote Address

In his remarks, Vice Chair Clarida outlined the purpose of the Fed’s review of its monetary 

policy strategy and the reasons for the ongoing Fed Listens series of events across 

the System. He said: “With the U.S. economy operating at or close to our maximumemployment and price-stability goals, now is an especially opportune time to conduct this 

review. The review of our current framework will be wide ranging, and we will not prejudge 

where it will take us.”30

Day Two: April 10, 2019

Research Panel 2

Heterogeneity: How Different Households Fare over the Business Cycle

Alisdair McKay discussed research on differences in monetary policy effectiveness over 

time. Current research—and central bank operations—assumes that past interest rate 

actions do not influence the power of current or future policy actions. McKay’s research 

suggests that durable goods purchases upend this conventional belief, showing that 

monetary stimulus does not create demand, but rather accelerates it, shifting purchases 

from future to present. History of rates, then, matters, current rates matter more than future 

rates, and demand is less sensitive to stimulus during recessions. “There are reasons for a 

central bank facing an effective lower bound (on interest rates) to keep its powder dry.”

Martin Schneider described research on interaction of monetary policy and revaluation of 

debt. When inflation lowers the real value of debt, wealth effects are good for borrowers 

30 See Clarida, “The Federal Reserve’s Review,” in note 28 (quoted text in paragraphs 3 and 11).
25

Part 2: Event Summaries | Federal Reserve Bank of Minneapolis

and bad for lenders. Monetary policy thus redistributes household wealth. If the Fed 

announces a higher inflation target, for example, it affects long-term debt more than shortterm. Quantitatively, this hurts older, rich households and benefits young and middle-aged 

middle-class households because they hold sizable mortgage debt, and future inflation 

lowers its value. There are eight moderate but persistent changes in macro aggregates 

because gains and losses do not cancel one another.

Hannes Schwandt spoke about research showing that business conditions when young 

adults enter the labor market have strong, persistent effects on their health, employment, 

and earnings. A 1 percentage point increase in the unemployment rate when entering the 

labor market would immediately cause a roughly 4 percent drop in earnings, fading out only 

gradually. Nonwhite and least-educated workers suffer larger earnings and employment 

losses than white college graduates; there are increasing effects on mortality after age 35; 

and negative wage effects reappear in midlife, along with adverse family formation and 

fertility outcomes.

Marianne Bitler discussed her research on cyclicality of the social safety net, particularly 

the EITC (earned income tax credit). The EITC is the most important antipoverty program 

for children, reducing poverty rates by over 6 percentage points. SNAP (Supplemental 

Nutrition Assistance Program) is important, while TANF’s (Temporary Assistance for Needy 

Families) reach is minimal. Research found that the EITC provides countercyclical protection 

for married couples with children but is weakly pro-cyclical for single filers with children.

When compared with food stamps, TANF, and UI (unemployment insurance), the EITC is 

the least responsive to business cycles. Thus, the EITC provides an automatic stabilizer for 

married couples with children, but not for single parents with children, and it is less cyclical 

than other safety net programs such as UI, TANF, and SNAP.

Q&A 

Questions concerned the effect of consumer durables on the timing of monetary stimulus, 

the quandary of monetary policy redistributing to the poor and middle class but possibly 

causing contraction through different spending propensities, clarifying channels from 

recessionary labor markets to bad life outcomes, buffering inequality via taxes and transfers, 

preferred policy responses to the next downturn, the symmetry of consumer durable 

purchases to expansion and tightening, the effect of forward guidance on assets affected 

by long-term rates, the labor supply effect of safety net programs, avenues to improve EITC 

take-up or boost benefits, the effect on labor outcomes of state economic conditions, and 

education enrollment and mobility responses to unemployment.

Policy Panel 2 

William Spriggs challenged the Fed to answer the question: Does inequality hurt economic 

growth? The OECD (Organisation for Economic Co-operation and Development) and 

IMF (International Monetary Fund) have said it does. “If inequality hurts growth, then 

we do have to worry what policies at the Fed exacerbate inequality.” He then discussed 

issues deserving greater attention: correlation between wage–productivity gap and rising 

household debt, rising share of finance in GDP (gross domestic product), and rising 

compensation in the financial sector. He further argued that there is a relationship between 
26

Fed Listens | Perspectives from the Public

financial-sector compensation and the wage gap, and that the Fed has a role in this 

because it has a voice in and some authority over compensation and concentration of the 

banking sector.

Susan Houseman spoke about shortcomings in current research on the prevalence of 

informal work and independent contracting. She noted that alternative work arrangements 

have a bearing on monetary policy in light of debate over diminished strength of the 

inflation–unemployment relationship. Such arrangements may indicate slack in labor 

markets; to assess this, it is important to measure the full set of work activities an individual 

undertakes. Two current studies that probed deeply into informal work suggest that it 

is more prevalent than indicated by the Current Population Survey and that people in 

such situations are concentrated in vulnerable groups: youth, minorities, low income, and 

likely to be under financial stress. “Development of consistent, high-quality time series on 

contract and informal work would help ... policymakers to better understand the degree of 

slack in labor market.” 

Q&A

Questions centered on whether improving safety nets or creating economic opportunities 

is more beneficial, what the Fed should do to improve average employment outcomes, 

measuring the economic importance of rental and sale markets like Airbnb and eBay, time 

trends in informal work, the most important indicators of inequality, whether inequality 

growth is a chicken–egg causality dilemma, a “right” level of inequality, and the significance 

of downtrends in new business starts.

Lunch Panel: Perspectives from the Community

This panel of Minnesota 

foundation, government, and 

community leaders placed a 

reality-based punctuation mark 

on the conference’s research and 

theoretical conversations. Citing 

higher unemployment among 

people of color and various 

housing, health-care, and childcare 

needs for low-income families, 

members of this panel expressed hope that the Federal Reserve was indeed listening 

and could develop research that translates into action to positively affect the constituents 

of their struggling communities. The panelists expressed some concerns that research 

focused on the macroeconomy or broad trends and so missed important exceptions to 

other trends that characterize life in some communities. However, some also expressed 

new appreciation for the Fed’s concern for a diverse set of communities as well as the 

policymaking challenges it faces.
27

Part 2: Event Summaries | Federal Reserve Bank of Richmond

Federal Reserve Bank of Richmond

On May 8, the Federal Reserve Bank of 

Richmond held a Fed Listens community 

listening session. This session was part of a 

broader effort within the Federal Reserve 

System to review the strategy, tools, and 

communication practices the Fed uses 

to pursue the monetary policy goals 

established by the Congress: maximum 

employment and price stability. At Fed 

Listens events throughout the country, the 

Fed has heard from community members, 

specifically, on how monetary policy affects them.

31

The event was hosted by Governor Lael Brainard of the Federal 

Reserve’s Board of Governors and President Tom Barkin of the 

Federal Reserve Bank of Richmond. The audience included 100 

alumni of two of Virginia’s key community-based leadership 

programs, Lead Virginia and Leadership Metro Richmond. The 

audience represented community and business leaders from across 

Virginia.

The event began with a brief introduction to the Fed’s dual 

mandate by Renee Haltom, a regional executive of the Richmond 

Fed. Governor Brainard then described the Fed’s review of monetary policy strategy, tools, 

and communication practices. She noted that the Fed wants to make sure the way it conducts 

monetary policy is keeping up with the way the economy is changing.

She shared two changes, in particular, that together represent a “new normal” for the U.S.

economy. The first feature is a low interest rate environment that is expected to continue due 

to fundamental features of the economy. Low interest rates present a challenge to traditional 

monetary policy in that there is less scope to cut interest rates if the economy were to encounter 

adverse developments. The second feature of the new normal is that inflation does not seem to 

move as much with economic activity or with employment as it has in the past. This “flatter Phillips 

curve” has some positive implications; for example, it means that labor markets can strengthen 

a lot without touching off a bout of inflation, and it means labor markets can pull in workers who 

may have been sidelined during the recession. However, one risk of the flatter Phillips curve is that 

it may be more difficult to boost inflation up to the Fed’s 2 percent objective on a sustainable basis 

over time.

Governor Brainard discussed two possible strategies for achieving the Fed’s inflation objective 

in this new normal: Make up for past misses on inflation by holding interest rates lower for a 

longer time than the Fed otherwise would, or consider averaging inflation over the longer term 

31 Additional information on the Fed Listens initiative is available on the Board’s website at https://www.federalreserve.gov/

monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-fed-listens-events.htm.
28

Fed Listens | Perspectives from the Public

to evaluate price stability. Governor Brainard finished by saying that these Fed Listens sessions 

will help provide necessary perspectives on how different citizens are affected by economic 

expansions and recessions, how different communities experience and view monetary policy, and 

what facts should inform Federal Reserve policymakers as they consider the consequences of 

monetary policy.

The listening session featured panelists from two nonprofit 

organizations and two businesses and was moderated by President 

Barkin. Each panelist briefly introduced themselves, described how 

the work of the Federal Reserve broadly affects their sector, and then 

responded to questions posed by President Barkin. Later, there was a 

chance for the audience to ask questions of the hosts and panelists.

The panelists were

• Sherrie Armstrong, president and CEO, Community Foundation

• Tim Davey, principal, Timmons Group

• Shawn Smith, director of workforce development, Goodwill of Central and Coastal Virginia

• Bobby Ukrop, chairman and CEO, Ukrop’s Homestyle Foods

The panelists began with broad observations on the effect of the Federal Reserve’s 

monetary policy on their constituents, customers, and communities.

In their opening remarks, the panelists offered a number of perspectives that connected with the 

Fed’s monetary policy goals of full employment and stable prices. Sherrie Armstrong from the 

Community Foundation shared that the Fed affects her business in at least two ways. First, much 

of the foundation’s focus is facilitating philanthropy in the community, and how well the economy 

performs has a direct correlation with the level of charitable giving. Second, the foundation 

focuses on educational attainment, workforce development, and affordable housing, and 

monetary policy touches each of these areas.

Tim Davey from Timmons Group, a professional services engineering firm, shared several ways 

in which the Fed’s mandate affects his sector and its customers. He pointed first to how full 

employment presents a challenge in terms of finding labor—as is currently the case for many 

professional services firms. The limited availability of labor in a full employment environment poses 

a challenge to growing both geographically and in market share. Second, many of the firm’s clients 

are in the real estate development business, where access to capital is an important determinant 

driving the level of activity. Third, he noted that the construction industry is currently booming in 

central Virginia and the region. Though overall inflation is subdued, prices related to construction 

are rising at a much faster rate. Finally, he noted that a trend driving all three perspectives is 

strong population growth in this region of the country, along with an overhang from insufficient 

construction in the past to keep pace with this population growth.

Shawn Smith, from the nonprofit Goodwill of Central and Coastal Virginia, noted that his 

organization utilizes a social enterprise model: As people donate to Goodwill stores, Goodwill 

translates that money into opportunities to support programs that help people find jobs. Many of
29

Part 2: Event Summaries | Federal Reserve Bank of Richmond

 the people they help have barriers to work, ranging from low educational attainment to cognitive 

issues. He said that a stronger labor market benefits their clients, as they are often at the bottom 

rung of the ladder—in a good economy, they are often left behind, and in a recession, they are the 

first to be laid off.

Finally, Bobby Ukrop of Ukrop’s Homestyle Foods, a food preparation firm whose products are 

sold to regional and national grocery store chains, noted that the firm is strongly affected by 

wages. He reported that while his workers earn $10 to $14 per hour and many have to work second 

jobs, he cannot raise wages because the company cannot easily pass on price increases to its 

customers. This is because the firm’s products are viewed as commodities, and grocery stores are 

under pressure from changes in consumer behavior, specifically around competition from new 

online sellers. At the same time, he cited challenges in finding and retaining good employees, 

who are needed to maintain high-quality food standards and who also must be willing to work at 

the facility, where the ambient temperature is around 45 degrees.

With unemployment at a 50-year low of 3.6 percent, can it go lower, or are we about done?

Smith compared the tight labor market to picking teams in gym class—the people he works with 

often are lower skilled and the last to be picked, and as the unemployment rate goes down, 

employers are forced to look at potential workers they might not have considered previously. For 

a lot of the jobs currently available, the people looking for work do not have the appropriate skills.

Many end up in a cycle of finding lower-level jobs and second jobs in order to get by. So while 

there are opportunities presently, they are not necessarily opportunities that will provide everyone 

with a sustainable lifestyle.

Ukrop said that unless wages rise, it would seem difficult to find additional workers. His best pool 

of workers are sometimes relatives of his current employees. Many are first-generation Americans 

with a strong work ethic and desire to work. Too often, he finds that potential employees do not 

want to work too hard or work in the cold.

Davey said that right now, any worker in the professional services sector has many options on 

where to work. He described low unemployment and competition for workers as a “thumb on the 

scale” potentially limiting growth in that sector. At any given time, his firm has 50 or 60 openings 

(of 600 total employees) fueled by growth or turnover, and the latter is prevalent now because 

workers have many choices.

The next step, then, is to bring more people into the labor force. How can we do that? 

What barriers are you seeing to doing so?

Armstrong said that there is a sense of urgency on this topic now within the Richmond region, and 

the community needs to take a systematic approach to workforce preparation and development.

In Virginia, employers cannot find qualified workers for all of the open jobs.

Davey shared that economic development teams are engaging with universities and community 

colleges as a solution to the current shortage of workers, as was the case with making the 

economic argument for bringing Amazon’s HQ2 to Virginia.
30

Fed Listens | Perspectives from the Public

Armstrong identified GO Virginia as a catalyst for 

convening a lot of different leaders in various areas of 

the state. She noted that the effort is often focused on 

higher-paying jobs, with additional efforts needed to 

create opportunities for all employees in Virginia.

Smith noted that more is happening with community 

colleges to promote certificate programs in various 

fields, but that many of these potential workers need 

“soft skills,” guidance on basic practices such as résumé writing and interviewing, and wraparound 

services to improve their ability to navigate the life complexities that often lead to loss of 

employment. He said Goodwill works with its clients to deliver these skills and also stays with them 

in their first year of employment to help them stay in their jobs.

Ukrop mentioned that J. Sargeant Reynolds Community College has a new culinary program 

that trains people in the food industry. He also mentioned a new grocery store in Richmond, The 

Market @ 25th, that employs 100 workers from its own neighborhood, but he said that missionoriented establishments also need to find a way to compete with larger chains to survive.

What, if anything, is preventing employers from raising wages to bring people in off the 

sidelines or to draw workers from competitors?

Davey indicated that his company has increased wages, and he noted that a firm must also sell the 

value on the other end to its customers. He shared that while wages are an important element of 

his firm’s recruitment and retention strategy, the company also focuses on strengthening its culture 

to attract employees.

Ukrop said employers need to start to look at innovative benefits for their workers. He identified 

one Charlotte, North Carolina, company that offers a “learn to swim” program for employees and 

their families. He suggested that “side benefits” are often the reason people stay in their jobs; it 

can make employees feel the employer is looking out for their best interests. He also remarked 

that “if you can’t raise your prices, it’s really hard to raise your wages.” He said his company cannot 

change product standards and has limited control over prices or wages, and so it is looking at 

benefits. He said larger businesses seem to have “lost their heart” in caring for their employees.

Smith remarked that Goodwill employs the very people 

the organization helps. Goodwill starts its workers at 

$10 per hour, which Smith said is not a living wage, but 

it comes with programs and other services to move 

employees forward in their careers so they can earn more 

outside of Goodwill.

What is stopping firms from trying to push through 

price increases to customers?

Davey stated that his company has had no choice but to increase prices, but, along with those 

price increases, Timmons has implemented increased customer service levels—to better connect 

with customers’ businesses to illustrate the importance of quality staff to shared success. He also 

noted that continued projects with an existing client can be more profitable than new projects 
31

Part 2: Event Summaries | Federal Reserve Bank of Richmond

with new clients, so teaching engineers “soft skills” that strengthen business relationships can be 

helpful. He feels that “culture” is important on the customer side as well, because customers hire 

firms for reasons other than price.

Armstrong remarked that the nonprofit sector is a very viable part of the economy in that 

it is generating income and creating jobs. However, the fact that its chief funding source is 

philanthropy creates a mindset that its services should be provided very cheaply—even though 

its chief product is its skilled labor. That pressure makes it difficult to attract qualified people. She 

also noted the effects of technological disruption. The proliferation of online retail creates a “get 

it now” expectation, and foundations have to compete with donor-advised funds that charge only 

a 2 percent fee. Organizations like hers need to determine how to charge for what they do while 

attracting and compensating the right employees.

Are panelists feeling inflationary pressure in input prices?

Ukrop said he has faced rising input prices; for example, he noted that a single major fast-food 

chain heavily drives the market price of chicken breasts, and this has a direct bearing on his 

company’s profitability because chicken breasts are used in many of its products. He observed 

that egg prices are down, packaging prices are up, and the rest of the commodity prices have 

been stable. He noted that companies like his that are viewed as producing commodities must 

be innovative—finding either more workers or more markets for their products, for example—by 

finding innovative ways to differentiate their products to customers.

Davey observed that after years of hardship, the construction industry is affected less by input 

price inflation and more by opportunity cost: Demand is so strong that contractors, from 

carpenters to plumbers to suppliers, do not have to take a job unless they stand to earn a healthy 

profit. Consequently, construction costs have risen 7 to 8 percent each year for the past few years, 

which is starting to delay certain development projects because a good developer is only going 

to move forward when the numbers, including financing, work. For the construction sector, he 

anticipates an extended period of growth because pricing is so favorable right now that both 

suppliers and subcontractors are profitable. He said owners are waiting a little longer on projects, 

but when they see prices are not coming down, they redo their project pro forma and proceed 

anyway.

Ukrop mentioned the Navy Hill project, a 10-block development effort in Richmond that includes 

a large affordable housing component, as an example of the extraordinary amount of construction 

going on in Richmond. He noted that these offer opportunity for extended growth and for 

economic improvement for people at the lower end.

What are the panelists hearing from low- to moderate-income households on the effect of 

inflation on them?

Smith stated that a slight increase in prices makes a difference to the people he works with 

because of their financial vulnerability. He said they are particularly sensitive to changes in gasoline 

prices and see little value in a well-performing economy and booming stock market.

Ukrop observed that hardworking people are resilient; they will work to help themselves.
32

Fed Listens | Perspectives from the Public

How would targeting higher inflation for several years to “make up” for missing the target 

rate in the past few years play out for the community?

Davey said that it made sense. In the construction industry, predictability and reliability are more 

important than “low” costs because of the long investment horizon of real estate projects.

What is the effect on households and businesses of the Fed having moved its target 

interest rate from near 0 percent to 2.4 percent over the past several years?

Ukrop said his employees have been affected, and many borrow from their 401(k) plans. He noted 

that people at the lower end are not very financially resilient.

Davey reiterated the importance of predictability of rates to those in the construction industry.

Rate hikes make money competitive, which he feels has been extremely healthy for almost every 

customer of his involved in project development or construction, and that helps his business grow.

Smith said many of the people he works with are unbanked, so changes in interest rates really do 

not affect them directly.

Armstrong indicated that she sees the effect on housing. Higher interest rates, coupled with rising 

house prices, make it difficult for lower-income or younger people to enter the housing market, 

which creates or perpetuates wealth gaps.

Ukrop noted that the rising cost of private education, at both the secondary and college level, has 

started to make the option unaffordable for the middle class.

What are the panelists seeing as emerging community-related issues that should be on the 

Fed’s radar?

Smith said a real concern is the “benefits cliff” that occurs because many government subsidies 

are based on earnings—as income rises, a worker can lose benefits. For example, if the typical 

cost of childcare per child is $25 per day, then that equates to $500 per month, or $6,000 annually.

An employee who receives a $1 per hour wage increase, amounting to $2,000 per year, may risk 

losing that $6,000 benefit, which would actually leave them worse off. This keeps low-income 

workers from taking jobs with higher wages and, in some cases, keeps them from seeking better 

opportunities.

Armstrong echoed that benefits cliffs are an issue and asserted a need for policy change. It is not 

that low-income workers do not want a better job, she said; rather, it is sometimes not in their 

financial best interest to make the change.

Ukrop said wage garnishment is an issue, and anytime there is a related change in policy, 

employers have to deal with a mountain of paperwork. The process is too complicated and may 

keep employers from providing wage increases for their workers.

How can the Federal Reserve do a better job connecting with the public and communicating 

our mission and the Fed’s actions?

Davey said it is important to understand how monetary policy trickles down to the household and 

how it affects areas of the country that are not as economically healthy. The Fed should educate 

the business community and the public on what works well and explain what challenges exist.
33

Part 2: Event Summaries | Federal Reserve Bank of Richmond

Armstrong said the Richmond Fed has been good about building relationships and 

communicating to the region it serves. Further, she stated that its reports, research, and data are 

good, but she called for the Fed to play a larger role in helping to shape solutions. She noted that 

the Fed has good resources, knowledge, and data—such as its historical work on early childhood 

education—but this is not widely understood in the community, and she suggested that it is 

important for the Fed to provide this type of thought leadership. She also noted that community 

partners do not always think to bring the Fed in.

Ukrop mentioned the Greater Richmond Partnership as an example of an organization that is able 

to maintain connectivity with the business community. It is important for the Fed to reach out and 

connect with the people doing business.

Summary of Audience Q&A

I have not heard anyone today mention entrepreneurship. How can we take these lessons 

and bring them to the evolving entrepreneurial economy in the Richmond area?

Davey remarked that monetary policy is relevant to 

entrepreneurs since the segment relies on private capital 

initially and then lending in the long term for businesses 

to be sustainable. Successful entrepreneurs along with 

the Richmond Fed can help educate and inform new 

would-be entrepreneurs in their own backyard.

Ukrop observed that a $15 hourly wage rate does not 

mean total compensation, because on top of that, 

businesses have to pay a 7.5 percent employment tax.

I grew up in the 1970s where there was no money and rapid inflation. My father always told 

me that we need some level of inflation because people are willing to pay for some price 

increase if they can get a pay raise. Is that a correct way to think about the value of having 

low but stable inflation?

President Barkin said that was a reasonable way to think about it. A similar concept could be 

applied to senior citizens who want a decent return on savings accounts.

A questioner noted that Davey endorsed the value that predictable inflation holds for the 

business community. He asked Davey to share his perspective on the prospect of the Fed 

allowing inflation to occasionally rise to “make up” for periods of too-low inflation—would 

that constitute less-predictable policy in a way that would not be good for business?

Davey responded that expectations would have to change in such a world. Understanding how 

those changes affect his firm’s customer base would probably be most important. He remarked 

that as long as population growth locally remains strong, private developers, commercial 

developers, and municipalities will have customers. Provided that remains the case, the sector 

could adjust its business model to changes in Fed strategy.
34

Fed Listens | Perspectives from the Public

An audience member commented that with the current low unemployment rate—and 

considering that many workers need wraparound support to address family circumstances, 

substance abuse, or low skills—efforts to bring people into the labor market can be scaled 

by sharing projects that have been proven to work rather than each community piloting 

new ones.

Armstrong said the community benefits from being organized and not addressing issues in a 

fragmented manner. It is important to coordinate with different entities so all citizens can benefit 

from the growing economy. For example, she pointed out that Smith’s organization is working 

to bring many service providers together in central Virginia. Community organizations need to 

connect to a bigger strategy to help individuals go where they want to go, she said.

Ukrop described the great work that organizations such as Caritas do to help bring individuals 

back into the labor force. But sometimes a person will go through programs and still face a hurdle, 

such as failing a drug test, and those can be difficult cases.

Can the Fed influence immigration policy?

President Barkin responded that the relevance of the issue to the Fed comes through the 

relationship of immigration to the economy’s long-term growth potential, which is driven in part 

by an increase in the number of people working. He said that this can be achieved through one 

of three ways: fertility, which takes a long time; legal immigration, for which numbers are higher 

than they were 10 years ago; and bringing people off the sidelines, the subject of much of the 

discussion at the event.

Governor Brainard recalled that the Fed undertook nontraditional monetary policy actions 

during the financial crisis and Great Recession. She asked the panelists if they cared about 

how the Fed does its job and the tools it is using, or if they cared just about the outcomes, 

such as low inflation and healthy employment.

Davey answered that in the construction sector, predictability is the most important thing. He 

noted that his firm’s clients interact with lending institutions, not the Fed, and currently have a lot 

of choices because banks are hungry to make loans. He said that in construction, it comes down to 

prices and terms: Control the price and you can agree to any terms, or control the terms and you 

can agree to any price. Those factors are much more important to his customers than any tools the 

Fed is using.

Ukrop agreed that uncertainty is the bigger concern for businesses.

I have heard that there is a possibility of a recession in 2021. Are the panelists expecting 

that?

Davey responded that every customer is reading different barometers, and that it depends on the 

predictability of Fed policy. He also noted again that continued regional population growth has 

been a healthy sign. In all, his customers generally feel good about conditions through 2022.

President Barkin remarked that long upturns in the economy are not unheard of, but this has been 

one of the longest in our history. However, Australia has had several decades of expansion, so it is 

not the case that we are “due” for a recession simply because of the length of our expansion.
35

Part 2: Event Summaries | Federal Reserve Bank of Richmond

He noted that it is hard to have a recession when unemployment and interest rates are low and 

financial markets are relatively stable. At the same time, outside risks are always possible—event 

risk has driven the past couple of recessions.

Davey asserted that it is helpful for the Fed to say that publicly, because it may be comforting to 

people making decisions about business two or three years from now.

Armstrong stated that her foundation is investing $800 million in community assets to grow 

endowment and return. She observed that investors do seem to worry that the economy is going 

to “turn,” which is hard to square with the economy’s strength. This disconnect is ameliorated 

somewhat by the fact that she takes a long-term view in terms of managing investments.

In areas of the country where population is actually declining, what are the issues? How 

are conditions different in the Rust Belt compared with the Sun Belt? How have weather 

events, such as flooding in the Midwest, affected areas differently?

President Barkin noted that the Federal Reserve is a System of 12 regional Reserve Banks, and the 

presidents of each Reserve Bank track developments in their region and share those when they 

convene to make policy. He responded that in rural areas and small cities, there are issues with 

declining population and jobs moving out. This is a complex, multicausal issue that the Richmond 

Fed has been studying.

Governor Brainard echoed that a consistent theme in all regions of the country is that some rural 

areas are really struggling.

An audience member noted that transportation to work is an issue in many rural areas. He shared 

that his company, a security consulting company, invests in employees’ transportation with them 

so the employee has skin in the game. His firm also partners with community colleges for criminal 

justice degrees, a faster training route than working 20 years as a security officer before entering 

law enforcement. Another thing his firm does is give employees decoration for special skills, such 

as being trained in a drone unit. In all, he noted that wage increases are not everything, and it can 

be effective to differentiate and incentivize people who are high performers.

There has been lot of talk about the low unemployment rate. The federal minimum wage 

has been at $7.25 for some time, while a “living wage” would be much higher. Does the 

Federal Reserve have any hand in the conversation over minimum wages, and does a higher 

minimum wage tie to inflation?

President Barkin responded that the Fed does not have a direct hand in that conversation; 

the minimum wage is set by cities or states based on their labor markets. He commented that 

the labor force has been tightest at the entry level, which is where wages have risen most, 

independent of government action.

The final audience commenter mentioned a Stanford University project on “collective 

impact,” a model that brings together different sectors to solve long-term community 

issues. The individual gave kudos to the Fed and to the panel for holding a discussion along 

the same lines.
36

Fed Listens | Perspectives from the Public

Federal Reserve Bank of Boston

The purpose of the Fed Listens conference was for Federal Reserve policymakers to gather 

feedback from a wide range of stakeholders on the Fed’s approach to monetary policy. This 

conference and similar events at other Reserve Banks across the country are an important externalfacing part of the review of the Fed’s monetary policy strategy, tools, and communication practices 

that the Federal Reserve is conducting in 2019.

The Boston Fed conference on May 13 gave representatives from various groups and communities 

in New England the opportunity to present their views to Fed policymakers on how well the Fed 

is fulfilling its dual mandate of stable prices and maximum sustainable employment. Accordingly, 

conference participants shared their perspectives on the effects that interest rates, inflation, and 

the labor market have on their demographic cohorts and communities.

The conference was divided into three panel discussions. The panel for the first discussion 

comprised representatives from organizations that focus on underserved populations. The second 

panel included small business owners, entrepreneurs, and labor leaders. Representatives from 

various demographic groups formed the third panel. Moderators posed a number of questions to 

each panel, many of which were asked of all panels. This summary highlights the discussion points 

prompted by each question, and it includes an overview of the responses to two surveys related to 

the conference that were conducted by the Boston Fed.

Question 1: What are the costs and benefits of the 

current tight labor market?

Most of the panelists representing underserved 

populations and different demographic groups agreed 

that the tight labor market was generally beneficial.

However, some panelists noted that while the 

national unemployment rate is near historic lows, the 

unemployment rate remains relatively high in minority 

and low-income communities. Panelists also emphasized that, in addition to unemployment, 

underemployment and low wages are serious problems, particularly in places where the cost of 

living is high, such as Boston. Some panelists expressed a concern that wages are not rising at the 

rate they would have expected, given the overall tight labor market. Still, for these groups, the 

overall benefits from the increase in jobs outweigh the concern about low and slowly rising wages.

Small business owners from all of the panels focused on the challenges posed by the tight labor 

market, primarily the difficulty of finding and hiring qualified employees. One panelist from a 

manufacturing company described attempts the company has made to address this issue—for 

example, by partnering with the local prison and creating a program that trains and recruits former 

inmates for employment.
37

Part 2: Event Summaries | Federal Reserve Bank of Boston

Question 2: Regarding the dual mandate, how do you view the relative importance of low 

unemployment versus stable prices?

The representatives for underserved populations agreed 

that in their communities, sustained low unemployment 

is more important than low inflation, though they 

were concerned that high inflation tends to lower real 

wages in their groups. Job turnover and low wages are 

widespread in these communities, panelists noted, and 

long periods of low unemployment can yield betterpaying jobs with less turnover.

Entrepreneurs and small business owners noted the link between low unemployment and wage 

pressure. These panelists agreed that wage pressure is one of the biggest concerns for small 

businesses, particularly those whose employees are at the low end of the wage distribution. One 

small business owner said that the company might soon have to raise its prices because of the 

wage increases it has had to pay for its employees.

Panelists representing retirees said inflation was a major concern for that demographic group; 

retirees want their savings to hold value, and so they are concerned about increases in the cost of 

living. Panelists also expressed skepticism about whether the inflation rate accurately represents 

changes in the cost of living, particularly for retirees, because costs such as those associated with 

health care have generally been rising faster than overall inflation.

Question 3: What effects have you seen from the long period of low interest rates? What 

are some of the costs you experience when interest rates change?

Panelists representing underserved populations said this question was not applicable to all 

members of their communities, because many have not had access to low interest rate credit.

These populations have traditionally been more susceptible to predatory lending, and a good 

portion of the community members have poor credit histories, which preclude them from taking 

advantage of low interest rates.

Small business owners generally found the low interest 

rate environment beneficial; one owner noted that the 

company recently increased investment because low 

interest rates allowed it to do so. However, business 

owners also said that they had expected rents to be 

lower than they are in this environment, and that high 

rents have prevented some companies from expanding 

as rapidly as they would like to.

Representatives for retirees understandably conveyed a more negative view of the low interest 

rate environment given the low return on savings.
38

Fed Listens | Perspectives from the Public

Question 4: How has the Fed done in terms of achieving its mandate over the past 

10 years? What can the Fed do better?

Overall, panelists spoke positively about the Fed’s 

work over the past decade. Many participants offered 

suggestions for how the Fed could do a better job 

serving their particular communities or the country as a 

whole, but many of the suggestions ventured into fiscal 

rather than monetary policy. The suggestions associated 

with the Federal Reserve overwhelmingly focused on 

community engagement, including establishing financial 

literacy education programs and inviting members of the 

various communities into the Bank for more events such as this one.

Survey Results

As a part of this research outreach effort, the Boston Fed conducted two surveys (see appendix).

One involved 35 conference participants. The median age of the respondents is 49, and the 

majority have a professional degree or doctorate. The second survey, completed through 

Amazon Mechanical Turk (Mturk), involved a larger (992 respondents) and more diverse group of 

participants. The median age of these respondents is 33. The majority have a college degree or 

higher, but this sample has a slightly lower level of educational attainment than the conference 

survey sample.

Both surveys asked about respondents’ views on unemployment and inflation, and they yielded 

different results. The conference sample aligned with the conference panelists, with the majority 

(63 percent) of respondents indicating they valued keeping unemployment low over keeping 

inflation low. The larger Mturk sample was more evenly split on this question, with 49 percent 

preferring to keep unemployment low and 51 percent preferring to keep inflation low. This split 

varied slightly by level of educational attainment, but most of the Mturk survey respondents 

who said they preferred to keep unemployment low are currently unemployed. Among the 

unemployed, the split was 67 percent to 33 percent in favor of low unemployment.

Regarding tolerable levels of unemployment, most of the participants in the two surveys said an 

unemployment rate over 5.0 percent is unacceptable; the central tendency of responses for a 

maximum tolerable unemployment rate fell between 4.1 and 5.0 percent. Both surveys revealed 

uncertainty about personal experiences with inflation. Twenty-nine percent of the conference 

survey respondents said they had “no idea” what inflation rate they had experienced over the 

past year. Of those who did select a rate, the majority said it was between 1.1 and 2.0 percent.

Similarly, in the Mturk survey, the greatest share of respondents (25.5 percent) selected an inflation 

rate of 1.1 to 2 percent. However, a large portion of respondents reported inflation rates from 

2.1 percent to greater than 8.0 percent. Regarding maximum tolerable inflation, the conference 

survey’s median response was between 2.1 and 3.0 percent. The median response remained 

largely unchanged when the question was asked in the context of income increasing at the same 

rate as inflation. In the Mturk survey, the majority of respondents said that an inflation rate over 

2.0 percent is unacceptable. The Mturk survey results included a breakdown of responses by age 
39

Part 2: Event Summaries | Federal Reserve Bank of Boston

group and showed that older respondents were less tolerant of inflation. Major concerns regarding 

inflation included worries about the difficulty of budgeting, a decline in real income, deterioration 

of savings, and stress.

Conclusion

Many of the participants in the Fed Listens conference appeared to be satisfied with tight labor 

markets and low interest rates, though some expressed concerns about whether all groups 

have received equal benefits from this environment. According to participants, underserved 

populations and minority communities still face higher unemployment and struggle with high job 

turnover. In addition, members of these communities often are unable to access credit because of 

poor credit histories and susceptibility to predatory lending. On the other hand, small businesses 

have struggled to find employees in this tight labor market. Most panelists said the groups 

they represent value low unemployment slightly more than low inflation. Responses from the 

conference survey reflected a similarly slight preference for low employment over low inflation.

Participants in the Mturk survey leaned the other way, with slightly more respondents valuing 

low inflation to low unemployment. Concerns regarding inflation came mostly from the retired 

community and older survey respondents, who worried about their savings being depleted by 

cost-of-living increases.

Appendix

Conference Survey Questions (The Mturk survey is similar but includes more detail.)

1. Which of the following options best describes the price inflation you experienced in the 

past year (12 months)? Please select the inflation range that best describes your experience.

(Available inflation ranges varied from “<0%,” “0%–1.0%,” “1.1%–2.0%,” ... , “7.1%–8.0%,” 

“more than 8.0%,” and “No Idea.”)

 Note: There are no right or wrong answers. We are interested in your experience and 

opinions.

2. What levels of annual inflation do you feel are acceptable? Please select all the inflation 

ranges that you would feel comfortable with. (Available inflation ranges varied from “<0%,” 

“0%–1.0%,” “1.1%–2.0%,” ... , “7.1%–8.0%,” “more than 8.0%,” and “No Idea.”)

3. If there are levels of inflation that you don’t find acceptable, why is that? Select all that apply.

• With high inflation, it is difficult to plan spending and do the household budgeting

• With high inflation, I cannot purchase as many goods and services as before

• With high inflation, I feel stressed

• With high inflation, the value of my savings will deteriorate

• With low inflation, the economy will slow down

• With low inflation, my income will grow more slowly
40

Fed Listens | Perspectives from the Public

• With low inflation, I will earn less on my savings

• With low inflation, I feel stressed

• I am comfortable with all levels of inflation

• Are there any other reasons for your being uncomfortable with certain levels of inflation? 

Please specify the reasons separately for high and low inflation levels, if applicable:

4. What levels of the national unemployment rate do you feel are acceptable? Please select all 

levels that you would feel comfortable with. (Available unemployment ranges varied from 

“0%,” “0%–1.0%,” “1.1%–2.0%,” ... , “7.1%–8.0%,” “more than 8.0%,” and “No Idea.”)

5. Do you think the national unemployment rate can be too low?

6. Why do you think that the national unemployment rate can be too low? Select all that apply.

• Unqualified workers will be hired

• Firms will have trouble finding workers

• I will have to work overtime

• Work productivity will decline

• It will lead to more immigration into the United States

• Inflation will go up

• Workers will be tempted to stay in dead-end jobs rather than pursuing further training for a 

better job in the future

• Other

7. Currently, both the unemployment rate and the inflation rate are relatively low. If you had to 

choose between keeping unemployment low by allowing inflation to rise, or keeping inflation 

low by allowing unemployment to rise, which would you prefer—keeping unemployment or 

inflation low?

8. If the Federal Reserve could improve your understanding of how monetary policy affects you, 

it would be through the following ways: Select all that apply.

• Better web presence

• Inviting comments more frequently

• Increased social media engagement

• More consumable or lay-friendly content

• More opportunities to receive updates

• More public meetings

• Other
41

Part 2: Event Summaries | Federal Reserve Bank of Philadelphia

Federal Reserve Bank of Philadelphia

On May 17, the Federal Reserve Bank of Philadelphia hosted a Fed Listens event attended by 

Vice Chair Richard H. Clarida and Ellen Meade, special adviser to the Vice Chair. Philadelphia 

Fed President Patrick T. Harker; Theresa Y. Singleton, senior vice president of the Community 

Development and Regional Outreach Department; and Ashley Putnam, director of the Economic 

Growth & Mobility Project, along with other Philadelphia Fed colleagues, participated in the 

listening tour.

The morning began with visits to a new manufacturing facility and a charter school in Camden, 

N.J., to showcase workforce development—something that the Philadelphia Fed believes is a key 

component of a healthy labor market.

The afternoon featured panel sessions that focused 

on the main directive of the Fed Listens initiative: to 

understand how different members of the public view 

the Fed, monetary policy, and the Fed’s effect on the 

economy. To gather a wide range of viewpoints, the 

afternoon sessions were divided into one panel of 

representatives from business and academia and a 

second panel of leaders from the philanthropic and 

nonprofit sectors. The first panel explored monetary 

policy and economic growth, and the second highlighted monetary policy and economic 

opportunity. The auditorium audience of about 90 guests included community development 

stakeholders, members of the Bank’s board and advisory councils, and Fed employees. Both 

sessions were moderated by Michael Dotsey, executive vice president and director of research, 

and Andrew Hill, economic education officer.

The goal of the panels was to delve into the basic questions posed by the Fed Listens initiative 

around the Fed’s strategy, tools, and communications, with an emphasis on the statutory goals 

of maximum employment and price stability. Other questions around the Fed’s research and 

community work were also included.

How is the economy doing?

When asked about the current state of the U.S. economy, 

both panels agreed that the economy was doing well 

and growing at a solid pace, but panelists said they 

felt that the progress was not evenly shared. The topic 

of inequality was discussed widely in both panels.

One business owner mentioned strong commercial 

construction and healthy home remodeling activity as 

signs of overall economic strength but said there remain 

regions where “the economy is not doing so well” and 

that “people are still struggling.”
42

Fed Listens | Perspectives from the Public

A philanthropic chief executive from Delaware mentioned that communities where the labor 

market is stagnant are dealing with empty storefronts, high rates of opioid addiction, and high 

levels of stress among households. A retail executive said it is essential that any discussion about 

the economy include addressing inequality. “How do we share the growth of the economy in a 

better way? How do we ensure the whole population is rising and sharing in the growth of the 

economy?” he said.

How are labor markets doing? 

Both panels were asked about labor markets. Again, the consensus was that labor markets are 

doing well, but mainly for high-skilled workers or for workers in vibrant urban areas. Others are 

missing out. Both panels placed greater emphasis on wages and uneven access to jobs than 

broader regional employment trends. The economics professor said, “People have jobs, but [not 

all are] well-paying jobs.” The Delaware philanthropist agreed: “Full employment at very low 

wages masks part of the problem.” But the business owner said the high cost of health care had to 

be taken into account.

The employment discussions also turned to the topic 

of the skills gap, with a specific focus on the U.S.

educational system’s shortfalls. “Education is strategic for 

the future,” said the college administrator, “but we have 

not changed our traditional educational system. And we 

need to realize that not every 18-year-old should go to 

college.”

Panelists agreed that job training is essential to 

creating a more inclusive economy. Such training could be done by employers, nonprofits, or the 

government. A community leader who works with disconnected youth in Philadelphia said better 

education access would give young people job opportunities, not just for now but also for the 

future.

And what of the future of work? In addition to the consensus view that our education system needs 

a reset, panelists also discussed the idea that automation will make career paths uncertain. “A big 

challenge is, who are we going to train and for what jobs?” said the college administrator.

One interesting anecdote was shared by the business owner, who said her current staff of truck 

drivers were aging into retirement, leaving a skills gap for her company. “We’re all waiting for 

autonomous vehicles,” she said, “but until then, we need truck drivers.” The conundrum for her 

company was how to attract younger workers to become truck drivers when that job may be 

obsolete in 10 to 15 years.

Which is more important, maximum employment or price stability?

Regarding the Fed’s dual mandate, the panels posted a split decision. The business–academia 

panel sided toward price stability, while the community development panel leaned toward 

maximum employment.

The reason for price-stability primacy was that, as the economics professor pointed out, it “can be 

more easily guided by Fed policy. The fed funds rate is a blunt tool to affect the labor market.”
43

Part 2: Event Summaries | Federal Reserve Bank of Philadelphia

Both business executives mentioned that the internet has 

changed pricing decisions. The business owner explained 

that the internet has brought with it pricing transparency, 

which has created a very narrow band in which to raise 

prices. The retailer agreed, saying, “The empowerment 

of the consumer has changed the dynamic between 

business and the consumer.”

The second panel, however, thought maximum 

employment was the more important goal, especially regarding low- and moderate-income 

(LMI) and minority communities. A leader in the nonprofit investment fund sector said the racial 

wealth gap is a result of lower wages and high unemployment for minorities over many decades.

In his view, the current employment situation in some neighborhoods is similar to that of the 

nation during the Great Recession. He asked, “What is the role of monetary policy once you 

disaggregate the data? Does a 10 percent unemployment rate in the Asian American, Latino, or 

African community obligate the Fed to act as it did during the financial crisis?”

How does monetary policy filter down to everyday activity?

The view on both panels was similar: Most people do not connect the Fed and its work to their 

everyday lives. A major reason for that is, many challenges faced routinely in the economy—

income inequality, a lack of access to transit, the skills gap—are not responsive to current Fed 

monetary policy tools, most notably the fed funds rate.

One nonprofit expert whose work focuses mainly on affordable housing issues said Fed policy can 

have an indirect role in daily decisionmaking. He said, “When I think of monetary policy, I think it 

comes down to confidence. If monetary policy is working well, then individuals have confidence in 

their own situations, and businesses have confidence in the decisions they are making about the 

future.”

What could the Fed do better?

The advice for the Fed centered on functions the Fed 

already performs—but that the public may not know fully 

about.

Members of both panels called for the Fed to take a 

bigger role in promoting financial literacy. “We are 

finding our employees, even highly skilled, have very low 

financial understanding,” said the business owner. “If 

there is a role for the Fed to explain how money works, 

how business works, I think that would be a tremendous and big impact.”

A greater understanding of how credit works could also help LMI households avoid decisions 

that can worsen budget strains. “Financial troubles can come from misinformation, such as with 

predatory lending,” said the college professor.

The nonprofit funding executive said the Fed is one institution that has the reach and scale to 

promote financial education. Such assistance in LMI communities could help lessen the distrust in 
44

Fed Listens | Perspectives from the Public

the banking system and enable individuals to make better saving and credit decisions, which could 

help build wealth.

Panelists also applauded the Fed’s outreach work with various partners. Within the System, this 

function is framed as the Fed’s “convening authority,” but for the panelists, this is the Fed’s ability 

to bring together different voices to discuss economic challenges. Fed conferences and research 

can inject economic issues into the public conversation. “The Fed talking about issues related to 

workforce and community development makes a big difference to our work,” said a workforce 

development expert.

Panelists suggested that the Fed could do more. “The Fed needs to say, ‘We want to understand 

what’s going on in your community so we can better understand how to conduct policy or regulate 

banks better.’ People will respond to that,” said the affordable housing leader. One caution, 

however, was that the Fed has to be intentional about its outreach efforts. As the philanthropist 

from Delaware said, “People are not interested in having conversations that don’t lead anywhere.”
45

Part 2: Event Summaries | Federal Reserve Bank of New York

Federal Reserve Bank of New York

The Federal Reserve Bank of New York hosted a series of Fed Listens discussions in the spring 

of 2019. In March and April, John C. Williams, president and chief executive officer of the New 

York Fed, facilitated Fed Listens discussions with three of the New York Fed’s external advisory 

groups, including members of the New York Fed’s Advisory Council on Small Business and 

Agriculture on Monday, March 25; Upstate New York Regional Advisory Board on Tuesday, March 26; 

and Community Advisory Group on Tuesday, April 3. The Fed Listens discussions culminated 

in a capstone roundtable discussion event hosted at the New York Fed on May 20 from 1:00 to 

3:00 p.m. The event featured a brief introduction by President Williams and opening remarks by 

Richard H. Clarida, Vice Chair of the Board of Governors of the Federal Reserve System, followed 

by a discussion session moderated by Jack Gutt, executive vice president of communications 

and outreach at the New York Fed. The attendees who participated in the discussion along with 

President Williams and Vice Chair Clarida included labor and nonprofit leaders, local government 

officials, congressional district staff, and regional academics from the Second District.32

The following is a summary of some of the key points 

raised during the New York Fed’s Fed Listens discussions.

Big Picture

When attendees were asked about how important the 

Fed’s two statutory goals are and whether they view one 

as more important than the other, answers were mixed.

For example, some members of the small business 

community said that price stability, which reflects 

input costs for small businesses, is more important to them than keeping unemployment low.

Participants from Puerto Rico also said that price stability was important given the island’s reliance 

on imports. However, for several participants who represent workers, the Fed is too focused on 

price stability at the expense of other aspects of a healthy economy.

Job Market

Across all of the discussions, there was consensus that at a national level, the United States is 

running a “tight” job market. Some labor leaders and employers argued that the benefits of 

running a tight labor market for a sustained period outweigh the risks. However, many expressed 

ongoing concerns about low- and moderate-income households even in today’s tight job market.

While wages have risen and the wage gap has diminished, participants emphasized that the cost 

of living, especially housing and health-care costs, remains a challenge for a large part of the 

population. Some members of the Community Advisory Group agreed that pushing the economy 

too hard and keeping interest rates low pose some risk because they tend to propel higher 

housing prices. During the roundtable discussion, participants voiced particular concerns about 

the cost of living and low wages for a generation of recent graduates who are burdened with a 

significant amount of student debt.

32 A webcast of the session, as well as the agenda and list of attendees, is available on the New York Fed’s website at https://www.

newyorkfed.org/aboutthefed/fed-listens.
46

Fed Listens | Perspectives from the Public

When attendees were asked whether we have reached 

“full employment,” there was no such consensus.

Some said they believed that we are at (or near) full 

employment, while many others argued that we are 

not at full employment, as evidenced by continued 

wage disparities and income inequality, and said 

the Fed should continue to push to see how low the 

unemployment rate can go. Those who said that we are 

not at full employment argued that the unemployment 

rate itself does not capture the tightness in the labor market. Labor leaders said that at full 

employment, firms would be spending on training, wages would be rising across the board, and 

there would be lower turnover. Many emphasized that despite the low U.S. unemployment rate 

and rising labor participation rates, certain pockets of the economy are far from full employment.

For instance, participants from Puerto Rico said that the territories are seeing “unbearable” 

unemployment and expect that those trends will spread to the mainland soon. Going forward, 

participants urged the Fed to focus on helping create quality jobs with living and equitable wages, 

not just minimum wages.

In order to maintain the tight labor market and improve 

productivity, many participants spoke to the need for 

skills training, especially as technology is expected to 

disrupt the future of work. Participants from upstate New 

York, small businesses, and labor leaders noted a sizable 

skills gap in labor supply versus demand, and that there 

is a need for job readiness programs, particularly for lowincome individuals.

Inflation

Many participants said that it is important that price inflation be predictable and stable.

Members of community groups said that stable inflation is particularly valuable for people in 

severe hardship. Some from upstate New York expressed a similar sentiment, explaining that 

inflation tends to be more concerning for low-income populations as opposed to higher-income 

populations, who tend to have the ability to absorb price changes. Participants from state and 

local governments said that stable inflation is critical for fiscal planning.

During the roundtable discussion, one participant argued that some inflation is good and echoed 

a sentiment from the advisory group discussions—that today inflation may be too low.

Younger participants noted that their generation is more concerned with another recession than 

with high inflation.
47

Part 2: Event Summaries | Federal Reserve Bank of New York

Transmission of Monetary Policy to the Broader Economy

Members of the advisory groups as well as many participants in the roundtable discussion 

expressed that they feel it is challenging to understand how a national monetary policy accurately 

reflects the multiple and diverse local economies that exist in the country. They worried that the 

effect of uniform monetary policy is very disproportionate. At all of the Fed Listens discussions, 

the need to address income inequality—both across households and geographically—was an 

important underlying concern.

In all of the discussions, participants emphasized the 

importance of the Fed communicating with the public 

about the state of the economy and its stance on policy.

Members of the small business community said that 

the Fed messaging is comforting to the community and 

provides certainty for businesses, especially in light of 

today’s political environment. Participants underlined the 

need for the Fed to remain independent and apolitical in 

order to maintain its credibility.

In order to enhance the effect of the Fed’s role in the community, participants recommended 

that the Fed think about communicating in different ways to get their message across to different 

sectors and populations of the economy. Rather than using terms like “full employment and 

stable inflation,” they said that the Fed should consider language that an average person 

would understand. During the roundtable discussion, some economists agreed with this 

recommendation, given that even from their perspective, the definition of “full employment” is 

unclear.
48

Fed Listens | Perspectives from the Public

Federal Reserve System

One of the Fed Listens events was a research conference hosted by the Federal Reserve System 

and held at the Federal Reserve Bank of Chicago in June. The conference included two panel 

sessions with panelists representing workforce development, higher education, senior citizens, 

CDFIs, small businesses, and organized labor; these panel sessions focused on questions 

associated with monetary policy.

33

Panel 1: What Does Full Employment Look Like for Your Community or 

Constituency?

This session assembled a panel that included leaders in labor, education, and workforce advocacy 

to discuss how current aggregate labor market conditions play out in the communities that 

they serve.

34 The panel began with brief introductions from each of the panelists, followed by a 

discussion led by moderator Governor Lael Brainard.

Panel Discussion

When we have a strong labor market (such as we enjoy today), what does that look like in 

your communities?

Dujakovich first described his members, who are drawn from a diverse set of industries, the bulk 

of whom are low- to middle-income workers. In part because manufacturing has been rocked by a 

33 Videos of panel sessions are available on the Federal Reserve Bank of Chicago’s website at https://www.chicagofed.org/events/2019/

fed-listens-conference-on-monetary-policy. In addition to the panel sessions, research economists from academia and think tanks

presented papers on topics pertinent to the Federal Reserve’s review of its monetary policy strategy, tools, and communication

practices; summaries of the research presented at the conference are provided in Part 5 of this report.

34 The panelists were Patrick Dujakovich, president of the Greater Kansas City AFL-CIO (American Federation of Labor and Congress 

of Industrial Organizations); Juan Salgado, chancellor of City Colleges of Chicago; and Andy van Kleunen, CEO of the National 

Skills Coalition. In addition to the panelists, Holly Wade, director of research for the National Federation of Independent Business, 

participated from the floor.
49

Part 2: Event Summaries | Federal Reserve System

number of external factors over the years, employment stability and sustainability are critical to his 

members.

Salgado’s students—largely African American and Latino—are benefiting from apprenticeship 

programs with local businesses that build pathways to entry-level jobs that might historically have 

gone to students with four-year degrees. He also noted that the national unemployment statistics 

are not reflective of his students, who, as a group, suffer considerably higher unemployment and 

lower labor force participation even in the midst of an otherwise vibrant city economy.

Van Kleunen reported that businesses in this environment are more aggressively reaching out 

to find workers. In addition, firms are building relationships with community colleges and job 

training institutes to prepare workers for a sustainable employment relationship. That progress is 

promising, but it is also slow to attain scale, he reported. He also observed that working on these 

margins is easier for larger firms to exploit; a corollary is that building more of these partnerships 

with smaller firms is an important goal to work toward.

Wade reported on developments in recruiting and training potential employees among her 

members. Her members are adjusting their recruitment strategies to current conditions, in part by 

lowering minimum qualifications for lower-skilled positions, but also by providing more in-house 

training programs.

For the most vulnerable households, those at the lower end of the skill spectrum, and 

those households of low and moderate income, how is this strong labor market changing 

prospects?

Dujakovich reported that for those among his members who are most vulnerable, it is generally 

difficult to get a foothold in the workforce, so the strong labor market has been a great benefit.

Employers are waiving prerequisites such as minimum years of experience, looking the other way 

on criminal record blemishes, and dropping the drug test requirement in some cases. They are 

also exercising more flexibility on family-related and personal absences because they have to, 

given tight labor markets.

Salgado tallied the many stresses that lower-income workers face. Importantly, this often includes 

trying to pursue education—perhaps at a community college—while they are working. He 

reemphasized the number of new training programs his system is offering in partnership with 

private businesses that are finding it harder to find new employees in the tight labor market.

He noted that this is a rare opportunity for these populations to get attached to the labor force.

Without that opportunity, many of these workers might never get the chance to participate fully 

and sustainably in the labor market.

Van Kleunen also emphasized the array of stresses on these workers—notably, pursuing education 

while working, providing childcare, and accessing transportation. While the focus in such 

discussions is often on worker training, a broader set of supports is needed to provide workers 

with a path to sustainable employment. In the current strong labor market, employers have a 

strong interest in building public and private support systems that address these stress points and 

make it more likely that they can retain workers.
50

Fed Listens | Perspectives from the Public

Can you be specific about what it takes to pull some of these populations into the labor 

force on a sustained basis? Do current labor market conditions change the likelihood that 

they will still be in the labor force even in a weak economy?

Dujakovich noted the importance of arrangements that provide workers with employment and 

income stability through the ups and downs of the economy. He recommended programs that 

allow workers to either move to part time or train for an advanced position when labor markets are 

not so strong. Workers who leave the workforce with little experience are extremely hard to get 

back.

Salgado noted that most of his students are low-wage workers, with only a small percentage 

covered by collective bargaining agreements. These potential workers especially value predictable 

schedules, as well as employers who support their efforts to increase their skills while on the 

job. He suggested that the best time to build skills is in the context of work or in work–school 

partnerships, when the new skills can be quickly put to use. He was concerned that, in the absence 

of a strong economy, employers might not address these challenges, so it is important to seize this 

opportunity.

Van Kleunen also discussed the benefit of more-flexible work arrangements that adjust hours 

rather than employment during downturns, perhaps augmented by government assistance to 

replace a portion of wages. He noted the general tendency to focus on current problems rather 

than the long-run future of the workplace, using the aging workforce as a key example. There 

has been little planning for how to prepare low-skilled workers to step in for the wave of retiring 

workers. Another example ripe for longer-term planning is changing technology (automation, 

artificial intelligence, and the like), which he estimates may affect 60 percent of jobs in some way.

We’ve discussed the fact that employers are looking at workers they might not have looked 

at before. How long does an expansion need to go, or how strong does the labor market 

have to be, before we can expect to bring these workers into the labor force? Is a strong 

labor market the only way to accomplish this, or are there other mechanisms to bring these 

workers to work?

Dujakovich noted that there is no question that the labor market has heated up, and that this is 

bringing more people in, bidding up wages to some extent because of competition for low-wage 

workers. He noted that counting on a pull from the top to raise the workers at the bottom is likely 

to be less effective than working directly on the bottom. In his experience, drawing such folks 

into the workforce often had multigenerational benefits. He also noted that today’s workers are 

stretching their income across three or four generations—helping support their parents, their own 

children, and their grandchildren.

Salgado noted the ways in which job market stresses are felt across extended families in these 

communities—the loss of a job or a home affects many other nuclear and extended family 

members. At the moment, he suggested, some of the many stresses that he highlighted 

throughout this discussion have been reduced or eliminated, giving people a fighting chance to 

focus on skill building and career advancement, highlighting the importance of sustaining a strong 

labor market. He also noted the desire to use this opportunity to build partnerships and systems 

that are resilient through the business cycle, not just at times like these.
51

Part 2: Event Summaries | Federal Reserve System

Van Kleunen suggested that solutions to address the challenges of coming changes in automation 

and technology might be best addressed by an entire sector or industry, rather than firm-by-firm.

Such an approach would take advantage of economies of scale and could be complemented by 

public policies that foster such collaboration across firms.

What are workers able to ask for in wages and benefits? How has that changed as the 

market has strengthened?

Dujakovich reported that it has been very difficult to get wage increases until recently, when fierce 

competition for workers has begun to bid up wages. He suggested that the lag time between 

the earlier increase in demand and the more recent rise in wages was likely due to the need to 

meet increases in other costs to employers, such as health-care and pension liabilities for some 

industries. He noted that another cost that arises from a very tight labor market is the need to 

cover for vacationing or sick workers, often at time-and-a-half wages. He expects to see more 

wage increases.

Salgado suggested public policy needs to address the minimum wage as well as the need for 

predictable scheduling. He emphasized the difficulty facing low-income workers who need to raise 

a family and maintain performance at work even when work schedules can be quite unpredictable.

Governor Brainard asked if graduates from Salgado’s colleges who become employed are 

enjoying more rapid wage increases. Salgado replied that his students, who are predominantly 

low-wage workers, are taking advantage of pipelines into high-demand occupations (in health 

care, advanced manufacturing, information technology, and supply chain management), with the 

opportunity to move up, and are seeing wage progression. He noted that in the aggregate, as 

students fill positions vacated by retiring workers who were making much more, we may not see a 

net wage increase, and this may contribute to a lack of inflationary pressure.

Van Kleunen noted that from the policy perspective, previous efforts have focused on 

opportunities in middle-wage skilled jobs, often ignoring the needs of lower-skilled workers in 

lower-wage jobs, who then do not get the opportunity to enter the labor force.
52

Fed Listens | Perspectives from the Public

Quits are often used as an indicator of how confident workers are in the availability of job 

opportunities. Are you seeing more of that kind of movement now? Or are workers still 

worried about their security in newly entered jobs?

Dujakovich suggested that, at the entry level, workers are mostly concerned with putting in 

enough time so that they are not the first to go in a downturn, which provides some disincentive to 

quit for other opportunities.

Salgado had seen many more career changers, seeking positions in skilled occupations and 

generally looking for a better overall fit to their career aspirations.

Van Kleunen wondered if there were policy adjustments that would make it easier for workers to 

pursue on-the-job training. He suggested that the rules for Pell grants might be changed to make 

them available to fund shorter-term certifications pursued while employed. Using these grants in 

that way would also help workers avoid going further into debt.

The Fed has a clearly defined mandate. How would you counsel the Fed to balance its 

responsibilities for price stability and maximum sustainable employment?

Panelists were consistent in suggesting that maximum employment should be the first priority.

Most important to these populations is a steady paycheck and a good job. Salgado wondered 

where the concern about inflation comes from. Wages are growing, but not at a concerning rate 

and not as much as they can or should grow. Van Kleunen added that we need to be careful to 

measure maximum sustainable employment in a way that captures all of those available for work, 

both in and out of the labor market.

Do the panelists have any words of advice on how we communicate and how we can better 

connect what we do to the communities you interact with?

Panelists felt that the Fed is doing a good job on the whole. Some panelists suggested it was 

partly their responsibility to disseminate some of the good information that the Fed and others 

already provide. Salgado suggested that we are probably not reaching all of the layers of 

leadership in his city who might want to be better tuned into the topics of this conference. He 

felt it was always better if the decisions made by the Fed are well understood by civil leadership.

Van Kleunen had worked extensively with the regional Feds, which he commended as valuable 

partners, both as conveners and as research providers. He suggested that this week’s convening 

constitutes interaction with the Fed at a different level. Still, he wondered how the Fed can be an 

even stronger voice at the national level on the issues under discussion today. Dujakovich noted 

that a respected and dispassionate voice is particularly important today, when he felt there is so 

much noise and animosity in public discourse.
53

Part 2: Event Summaries | Federal Reserve System

Panel 2: Transmission of Monetary Policy to the Economy: Beyond the 

Headlines

This session assembled a panel on the transmission of monetary policy to the broader economy.

35

The panel was intended to provide non-economists’ perspectives on how monetary policy affects 

different segments of the U.S. population. The panel began with brief introductions from each of 

the panelists, followed by a discussion led by moderator President Eric Rosengren.

Panel Discussion

How do people feel about the transmission of monetary policy? When the FOMC is raising 

short-term interest rates, how does that affect your constituencies?

From the perspective of CDFIs—organizations that rely on donations and investments from other 

entities to fund their lending to financially underserved or low-income constituencies—Barrera 

and Jones emphasized that the level of interest rates matters a great deal. Banks pursuing their 

community development goals are an important source of CDFIs’ funding, and the cost of that 

funding is a key consideration for CDFIs. In particular, when market interest rates rise, CDFIs 

have to either pass on their higher cost of capital to their constituent borrowers or rely more 

on donations to help defray that cost. At times, higher interest rates result in higher revenues 

for CDFIs’ donors, which in turn can lead to increased donations, but that benefit needs to be 

weighed against the possibility that some projects will not get off the ground if their financing 

costs cannot be kept low enough for CDFIs’ constituencies.

The discussion also addressed some of the potential benefits and costs of higher interest rates 

to current and future retirees. John remarked that the low interest rate environment of the past 

several years has had a decidedly negative effect on earnings on retirement savings. In particular, 

for a given retirement goal, lower returns on fixed-income investments have required individuals 

35 The panelists were Janie Barrera, president and CEO of LiftFund; David John, senior policy advisor at AARP Public Policy Institute; 

Maurice Jones, president and CEO of Local Initiatives Support Corporation; and Holly Wade, director of research and policy analysis at 

the National Federation of Independent Business.
54

Fed Listens | Perspectives from the Public

to save a greater share of their income than in previous decades, although, to some extent, the 

negative implications of this development have been offset by historically low borrowing costs.

The discussion also highlighted that individuals are now generally going into retirement with more 

debt than in the past, potentially leaving them vulnerable to future interest rate increases.

Addressing the question through the small business lens, Wade remarked that, although the 

cost of funding is now a little higher than in the recent past, what matters most for small business 

owners is the return on investment for the projects they are interested in. While access to credit 

is generally a lifeline for small firms, she noted that—with the economy currently strong—small 

businesses’ main source of funding has been earnings and profits, with small changes in the 

general level of interest rates being much less of a concern.

An important part of monetary policy is not only the actions the Fed takes, but also how 

the Fed communicates its actions. How do people understand what the Fed does? How can 

the Fed do better?

The discussion started with a focus on small businesses. Wade said small business owners rely 

on radio and television as their main sources of financial and economic news and, as a result, 

as their main filters for understanding Fed announcements and actions. Other media were also 

mentioned; Twitter, in particular, is becoming an increasingly important form of communication.

Nonetheless, it was noted that, in general, understanding Fed actions can become very confusing 

very quickly, given that there is so much uncertainty out there about what the Fed did and why.

Wade noted that the National Federation of Independent Business communicates with its 

membership about interest rates and Fed policy.

With regard to specific Fed communication practices, John suggested that the Fed’s postmeeting 

policy statement could be improved by clearly reporting in its opening sentences what policy 

action was taken at that meeting. Instead, the Fed’s current practice forces readers to search for 

the policy action somewhere in the middle of the statement. Still, the discussion acknowledged 

that most people do not read the statement and will, at best, read about it in the press. As a result, 

it is important to educate the press on the Fed and the rationale for its monetary policy actions.

Barrera and Jones emphasized the need to tailor the policy message to different audiences, 

noting that what works for an academic or professional audience will not necessarily reach the 

general public. They also highlighted the importance of community events for explaining what the 

Fed does and why that matters.

In their communications with their own constituencies, all of the panelists mentioned their reliance 

on a variety of media, ranging from email, Twitter, YouTube, and webinars to radio, television, print 

media, and in-person events.

How do people think about the availability of credit? Which one affects your membership 

more, cost or availability of credit?

Barrera remarked that, for most financially underserved or low-income communities, bank credit is 

not an option; it is simply not available in many cases. Those communities either live in a cash-only 

economy or rely on higher-cost financing alternatives. As a result, for these communities, the main 

issue is access to credit at a rate that is not prohibitive. Jones noted that both price and access 

are important: The cost of credit is the key consideration for the financing associated with real 
55

Part 2: Event Summaries | Federal Reserve System

estate or housing projects, whereas access is the most important consideration for individuals with 

negative or zero net worth.

With regard to individuals who are in or nearing retirement, John emphasized that, in the current 

environment of low interest rates, access to credit has been a more important factor than the price 

of credit. He noted, for instance, that older individuals are increasingly taking out mortgages that 

they will carry well into retirement.

Referring to small businesses, Wade noted that being able to access credit when needed is crucial.

While the cost of credit certainly is a factor, changes in that cost can typically be absorbed by 

businesses provided that they expect reasonable returns on the projects that they are undertaking.

How does your membership think about the tradeoffs between the Federal Reserve’s two 

goals of low inflation and maximum employment?

Wade highlighted that having a predictable foundation for inflation is critical for most small 

business owners. With employment conditions reflecting so many factors that are not directly 

affected by the Fed, it becomes especially important for the Fed to keep uncertainty on the 

inflation front to a minimum. That said, she noted little indication that inflation is currently a major 

concern for small businesses. For instance, while surveys of small businesses show some upward 

pressure on compensation, businesses have been able to absorb much of that pressure.

Those in the CDFI community offered a different perspective on the relative importance of the 

Fed’s two goals. Jones pointed to employment as the best tool for fighting poverty, emphasizing 

that the prolonged period of low unemployment that we are experiencing has given low-income 

people a better chance of becoming employed and, as a result, of improving their longer-term 

economic prospects. He noted that businesses are now digging deeper into the potential hiring 

pool—bringing in people they would not hire otherwise—and added that many in the CDFI 

community are skeptical of the fear of high inflation down the road as a direct result of today’s low 

unemployment numbers.

John indicated that older Americans might also be more attuned to the Fed’s maximumemployment objective than to its inflation goal. Employment was said to have become a more 

important issue for the current generation of older Americans because they are now retiring later 

than previous generations. At the same time, older Americans were characterized as being unlikely 

to see a small overshoot of the Fed’s inflation target as a serious problem, although those living on 

fixed incomes would be adversely affected if inflation were to rise substantially.

Referring to the population as a whole, Barrera noted that most people might not know what 

inflation is or how high it is, but they certainly do notice when the prices of the goods and services 

that they buy start rising.

How do you think about longer-term interest rates versus short-term interest rates?

Barrera and John commented that long-term rates matter more than short-term interest rates 

because the former determine the return on investments. Jones noted that shorter-term rates 

are also important because the Local Initiatives Support Corporation borrows short term. Wade 

discussed surveys suggesting that small businesses attach similar importance to short- and longterm rates.
56

Fed Listens | Perspectives from the Public

Discussion

President Neel Kashkari (Federal Reserve Bank of Minneapolis) asked whether John’s constituents 

at AARP see the economy as being at maximum employment. John responded that there are still 

a significant number of older Americans who would like to have a job, and thus, at least from that 

perspective, the U.S. economy had not yet reached maximum employment.

Jared Bernstein (Center on Budget and Policy Priorities) asked about people who remain out 

of work even in a very tight labor market and whether there could be a role for government as 

employer of last resort. Jones remarked that, even in the current environment, there could be a 

role for the government to play in offering employment opportunities for those with the poorest 

employment prospects, but only if those opportunities were focused on providing skills that would 

allow individuals to move on to sustainable employment in the broader economy.

Randy Kroszner (University of Chicago) followed up about not only what the broader public 

understands about inflation and what inflation measures, but also whether economists could use 

clearer vocabulary to communicate in layman’s terms. The panelists offered various suggestions 

regarding the challenges associated with communicating economic concepts to the general 

public. The suggestions ranged from creating blogs aimed at explaining basic principles to 

reiterating the importance of getting to know one’s audience.
57

Part 2: Event Summaries | Federal Reserve Bank of Cleveland

Federal Reserve Bank of Cleveland

The Cleveland Fed took several approaches over the first half of 2019 to solicit a wide range of 

perspectives from diverse stakeholders to help inform the Fed’s review of the strategy, tools, and 

communication practices used to pursue its monetary policy goals.

36

The very low unemployment rate and the stable inflation reported by government agencies may 

mask serious deficits in LMI communities, community development practitioners and researchers 

told Fed policymakers at the Federal Reserve Bank of Cleveland’s Fed Listens session on June 21 

in Cincinnati. Low pay and mismatches between job openings and workforce skills are among 

the shortcomings preventing LMI communities from sharing more fully in a steadily expanding 

economy, Fed Listens participants told Cleveland Fed President and Chief Executive Officer 

Loretta J. Mester and Federal Reserve Governor Lael Brainard.

The Cleveland Fed’s event was one in a series of listening sessions being held by Reserve Banks 

to help inform the Federal Reserve’s review of the strategy, tools, and communication practices 

used to pursue the monetary policy goals established by the Congress: maximum employment 

and price stability. The Fed Listens session capped the Cleveland Fed’s “Policy Summit 2019: 

Connecting People and Places to Opportunity,” hosted in partnership with the Federal Reserve 

banks of Philadelphia, St. Louis, Minneapolis, and Chicago.

In introductory remarks, President Mester noted that the Federal Reserve has a keen interest in 

understanding the effect its research and policy have on its various constituents, including those 

in LMI areas. Governor Brainard added that the Fed was undertaking the Fed Listens initiative “to 

hear how Americans are experiencing the economy day to day and to make sure we are carrying 

out the monetary policy goals assigned to us by the Congress in the most effective way we can.”37

About 200 Policy Summit participants were then asked to think about and discuss two questions 

during lunch:

1. According to the national statistics, the labor market has improved significantly compared 

to five years ago. Today, what does the employment picture look like in low- and moderateincome communities that you know and/or serve?

2. Over the last five years, official measures of inflation have typically been running below the 

Fed’s 2 percent objective. How has inflation been affecting the low- and moderate-income 

communities you know and/or serve?

36 A full summary of the Cleveland Fed’s Fed Listens program is available on its website at https://www.clevelandfed.org/~/media/

content/events/2019/ps/cleveland%20fed%20listens%20program%20summary.pdf?la=en.

37 See Lael Brainard (2019), “Fed Listens in Cincinnati: How Does Monetary Policy Affect Your Community?” speech delivered at “Policy 

Summit 2019: Connecting People and Places to Opportunity,” a conference sponsored by the Federal Reserve Bank of Cleveland, held 

in Cincinnati, June 21, quoted text in paragraph 2, https://www.federalreserve.gov/newsevents/speech/brainard20190621a.htm.
58

Fed Listens | Perspectives from the Public

Participants shared views on these questions at their tables and then with President Mester and 

Governor Brainard. A summary:

Question 1: Employment in LMI Communities

A recurring observation among attendees involved employment mismatches between the needs 

of businesses and the skills of available workers, as well as a shortage of paths out of low-paying 

positions. Discussants noted an abundance of low-skill, low-wage jobs and a dearth of midlevel or 

mid-skill jobs. Attendees from Ohio and Kentucky observed that the recent surge in low-wage-job 

creation followed the exodus of manufacturing jobs paying livable wages. Underemployment—not 

necessarily unemployment—is a pressing concern in LMI communities. Either high-skill workers 

are provided opportunities in positions far below their capabilities or low-skill workers are not 

receiving adequate training for higher-skilled open positions, participants said. If people are able 

to climb a rung or two up the income ladder, they must contend with cliff effects involving the loss 

of access to government-subsidized programs following increases in household income. Some 

attendees said workers often face an unappealing tradeoff between a relatively low-paying job 

versus benefits such as SNAP, affordable housing subsidies, and health-care coverage.

Participants at one table said wage growth is a better indicator of the nation’s economic health 

than inflation. Several groups mentioned that wage stagnation is deepening wealth and income 

gaps, and one speaker summarized a table’s thoughts on the availability of entry-level positions 

this way: “People don’t want them.” Lack of transportation linking people to their jobs was a 

recurring theme, particularly for people in rural areas. Commenting on persistent transportation 

shortcomings, one attendee suggested that community development leaders should target job 

creation in LMI regions with difficulties accessing high-opportunity areas.

To address mismatches, participants suggested improving both education and transportation.

Regarding education, attendees said both schools and employers must improve how they prepare 

the labor force. One participant noted an abundance of technical programs at community colleges 

near Dayton, Ohio, that are routinely underutilized, and another said employers are increasingly 

importing workers from other locales for their businesses rather than investing in local workers.

Other employment challenges frequently mentioned included the opioid crisis and reintegrating 

formerly incarcerated workers into the labor force.
59

Part 2: Event Summaries | Federal Reserve Bank of Cleveland

Question 2: Inflation

Inflation was not a primary point of concern in many 

discussion groups. During the open-discussion 

session with President Mester and Governor Brainard, 

one participant underscored that residents in LMI 

communities are generally unaware of inflation because 

current prices are too high relative to the wages 

employers pay. Similar notes from table moderators 

suggest this was a common point of view.

While many LMI communities report not feeling the 

relative effects of inflation, participants did say the 

rising cost of necessities does burden households.

Many tables cited childcare and health-care costs as 

two major financial pressure points for LMI individuals.

Participants noted the direct effect of health-care costs on LMI families. Others noted an indirect 

effect: Rising health-care costs for businesses put downward pressure on wages. One commenter 

also suggested reconsidering how inflation is calculated for LMI individuals, particularly given 

the fact that expenditures such as housing, utilities, and groceries account for a large percentage 

of income for low-wage workers. Participants expressed skepticism about the robustness of 

economic health based on topline numbers. “Economic health isn’t what the numbers show,” one 

participant wrote. There is “no resiliency among LMI communities.” “Many people are struggling, 

so how are we near ‘full employment’?” another wrote.

The Federal Open Market Committee (FOMC) will be discussing economic research and the 

perspectives offered during the Fed Listens events as part of its policy review. Policymakers plan 

to report their findings to the public during the first half of 2020. Governor Brainard summarized 

some of the main themes she heard from the discussion, including the lack of connection felt 

by communities cut off by physical barriers, such as those in rural areas, or those seeing a high 

incidence of opioid addiction, along with structural barriers tied to racism or formerly incarcerated 

people. Governor Brainard concluded that participants’ “insights today were extraordinarily 

valuable to us. What’s clear to me is that this expansion and continuing it are extremely important 

to create opportunities, but it’s not enough.”

In her closing remarks, President Mester noted that 

many of the solutions to the economic stresses of 

LMI communities and people lie outside the realm of 

monetary policy, but she pledged to bring their concerns 

to the appropriate policymakers. “What we can do by 

collecting your comments and summarizing them is make 

sure that they get into the hands of the people that can 

actually make those policies,” President Mester said. “My 

promise to you is that we will make sure that people hear 

what you’re saying.
60

Fed Listens | Perspectives from the Public

Summary of the Federal Reserve Bank of Cleveland’s Fed Listens Program

The Federal Reserve Bank of Cleveland took several approaches to solicit a wide range of 

perspectives from diverse stakeholders across the Fourth District to help inform the Federal 

Reserve’s review of the strategy, tools, and communication practices used to pursue the monetary 

policy goals established by the Congress: maximum employment and price stability.

38

Between March and May 2019, the Cleveland Fed queried its Community Advisory Council (CAC), 

its eight Business Advisory Councils, its Branch boards of directors in Cincinnati and Pittsburgh, 

and more than 600 direct service providers through its Community Issues Survey.

39 Questions were 

customized to each audience and focused on how the Fed’s monetary policy affects respondents’ 

businesses and communities, including the perceived advantages, if any, of running a “hot” 

labor market, the importance of stable price inflation, and the effects on LMI communities and 

individuals. Capping off the effort, a Fed Listens session with Federal Reserve Governor Lael 

Brainard and Federal Reserve Bank of Cleveland President and Chief Executive Officer Loretta J.

Mester was held on June 21 to conclude the Cleveland Fed’s “Policy Summit 2019: Connecting 

People and Places to Opportunity” in Cincinnati, Ohio.

40

Community Advisory Council 

The Cleveland Fed’s CAC comprises experts and leaders in the Fourth District and convenes them 

to discuss issues of concern to underserved and lower-income individuals and communities. Its 

purpose is to inform and advise the Cleveland Fed about current and emerging economic and 

social issues and trends affecting these individuals and communities. At the CAC’s March 2019 

meeting, members were asked to comment on monetary policy’s effect on LMI communities using 

the following prompt and question:

Monetary policy refers to the actions the Fed takes to achieve both stable prices and 

maximum employment. With this in mind, please consider the following question: 

How does the Federal Reserve’s monetary policy broadly affect the communities you 

represent with respect, for example, to housing, access to credit, retirees/savers, 

small businesses, or community banks? 

38 The Fourth District comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

More information on the Federal Reserve’s review is available on the Board’s website at https://www.federalreserve.gov/monetarypolicy/

review-of-monetary-policy-strategy-tools-and-communications.htm.

39 Additional details about the Community Advisory Council, the Business Advisory Councils, and the boards of directors of the 

Cincinnati and Pittsburgh Branches can be found on the Cleveland Fed’s website at https://www.clevelandfed.org/en/about-us/

advisory-councils/community-advisory-council.aspx, https://www.clevelandfed.org/en/about-us/advisory-councils/business-advisorycouncils.aspx, https://www.clevelandfed.org/en/about-us/our-directors/cincinnati-directors.aspx, and https://www.clevelandfed.org/en/

about-us/our-directors/pittsburgh-directors.aspx, respectively.

40 More information on Fed Listens events is available on the Board’s website at https://www.federalreserve.gov/monetarypolicy/reviewof-monetary-policy-strategy-tools-and-communications-fed-listens-events.htm.
61

Part 2: Event Summaries | Federal Reserve Bank of Cleveland

Key Takeaways 

Several themes about the economic and financial challenges of LMI communities emerged in the 

discussion that followed. Some of the themes were not easily connected to monetary policy: 

• Access to personal credit, savings, and retirement: Monetary policy affects the cost of accessing 

credit, particularly for families that lack good credit and are otherwise stressed financially.

Access to credit for businesses, including small businesses, was mentioned as potentially being 

affected as well.

• Job access and wages: To the extent that monetary policy can further boost employment, LMI 

communities would likely benefit, though employment barriers can be more local and include 

public transportation and lack of job training.

• Multifamily investment and housing policy: A council member noted that monetary policy may 

affect multifamily affordable housing construction because of lending costs. Multifamily LIHTC 

(low-income housing tax credit) projects may need more soft money—money that does not 

go into the physical construction, but instead goes toward such items as fees in order to fill 

financing gaps.

• Public funding and other investments: Monetary policy decisions may have implications for 

nonprofit bond issuance and yields. Smaller municipalities are having problems with access to 

credit.

Business Advisory Councils and Boards of Directors

Surveys were administered to the Cleveland, Cincinnati, Columbus, Dayton, Lexington, Pittsburgh, 

Erie, and Wheeling Business Advisory Councils and to the Cleveland Fed’s Cincinnati and 

Pittsburgh Branches’ boards of directors. Members were asked several questions related to 

monetary policy.

Key Takeaways and Select Responses 

1. The Fed’s two goals of maximum employment and price stability were seen as either very 

important or extremely important in a large majority of the responses.

2. Price stability and maximum employment both contribute to confidence in the current 

economy. Confidence in the economy translates into growth. Most respondents believed the 

Federal Reserve was either somewhat successful or very successful over the past decade at 

achieving both of its goals.

3. The survey asked about the advantages and disadvantages of running a “hot,” or tight, labor 

market. According to respondents:

• Advantages: Increased minimum wage, employers’ placing more value on employees, 

increased urgency to invest in workforce development, and reduced transfer payments.

• Disadvantages: Higher employee turnover, employees who feel they should be paid more, 

employees sacrificing long-term career goals for short-term gains, and employee burnout.
62

Fed Listens | Perspectives from the Public

4. A majority of respondents believed that workers were either somewhat or very able to ask for 

and secure higher wages.

5. In order to contain turnover and retain qualified employees, some respondents said they have 

granted higher merit wage increases to employees for the past few years (relative to the cost 

of living and to historic levels) and often are willing to increase the wage level of employees to 

retain them.

6. Most respondents said they believe it is very important for price inflation to be predictable and 

stable. They said that this helps predict a firm’s profitability, anticipate clients’ future buying 

power, and create a more equitable economy, and it allows households to better predict future 

spending, including for retirement and home purchases.

7. Most respondents said their firms have not been affected by inflation over the past decade.

Community Issues Survey 

The survey is sent biannually to organizations in the Fourth District that directly serve either LMI 

individuals or communities (for example, workforce boards, food pantries, small business centers, 

workforce training providers, and housing or health and human services agencies). In March, the 

survey was sent to more than 600 contacts, with 180 direct service providers responding

(29 percent response rate). This iteration included the following question: 

For our final question, we’re going to switch gears to monetary policy. The Federal 

Reserve has a dual mandate from Congress with the goals of maximum employment 

and stable prices. The Fed conducts monetary policy to achieve these goals 

primarily through its interest rate policy—setting a target for the federal funds rate. 

The federal funds rate influences the interest rates that consumers and businesses 

pay for loans. 

With that in mind, please consider this question: How well do you feel the Federal 

Reserve’s interest rate actions take into account issues facing the low- and moderateincome people you serve? 

Key Takeaways 

1. A majority of respondents either did not think the Federal Reserve considered LMI people in 

their decisions (27 percent) or said they did not know (27 percent).

2. Respondents who felt the Fed did not consider LMI people when making monetary policy 

cited reasons such as a greater focus on the middle class, a feeling that low-income people are 

generally disregarded because the extent of their borrowing is limited, or a feeling that they are 

unaffected by interest rate changes.

3. There were some who felt the Fed does consider low-income individuals: “There seems to be 

a real understanding of low-income economic struggles as well as a continual and proactive 

attempt to keep a finger on the pulse of the community,” said one provider.
63

Part 2: Event Summaries | Federal Reserve Bank of Cleveland

The Fed Listens: A Discussion with Federal Reserve Leadership

On June 21, the final session of Policy Summit 2019 featured Federal Reserve Governor Lael 

Brainard and Cleveland Fed President and Chief Executive Officer Loretta J. Mester in a 

Fed Listens event on the intersections between community development and the economy.

Conference attendees, who included social service practitioners, policymakers, and researchers, 

discussed with each other two questions related to the Fed’s monetary policy and then shared 

their thoughts with the Fed policymakers.

In introductory remarks, President Mester noted that the Federal Reserve has a keen interest in 

understanding the effect its research and policy have on its various constituents, including those 

in LMI areas. Governor Brainard added that the Fed was undertaking the Fed Listens initiative “to 

hear how Americans are experiencing the economy day to day and to make sure we are carrying 

out the monetary policy goals assigned to us by the Congress in the most effective way we can.”41

About 200 Policy Summit participants were then asked to think about and discuss two questions at 

their tables:

1. According to the national statistics, the labor market has improved significantly compared 

to five years ago. Today, what does the employment picture look like in low- and moderateincome (LMI) communities that you know and/or serve?

2. Over the last five years, official measures of inflation have typically been running below the 

Fed’s 2 percent objective. How has inflation been affecting the low- and moderate-income 

communities you know and/or serve?

Participants shared views on these questions at their tables and then with President Mester and 

Governor Brainard. The following summary includes excerpts from those comments and notes 

taken by designated moderators during the discussion period.

Question 1: Employment in LMI Communities

Many attendees identified as a major issue mismatches between the needs of businesses and the 

skills of available workers. One participant noted that finding talent takes too long for businesses, 

though others said many jobs created by businesses are unattractive to prospective employees.

Some participants noted a lack of midlevel or mid-skill jobs. One moderator summarized a table’s 

thoughts on the availability of entry-level positions: “People don’t want them.”

Similarly, participants noted that jobs created in LMI communities are often low-paying positions, 

noting that underemployment is more pressing than unemployment (see “Other Observations” 

later in this summary). Attendees from Ohio and Kentucky observed that the recent surge in lowwage job creation followed the exodus of manufacturing jobs paying livable wages. Attendees 

at one table said that wage growth is a better indicator of the economy’s health than inflation.

Several tables mentioned that wage stagnation is deepening wealth and income gaps.

Many tables said that public transportation fails to adequately link LMI communities to jobs, 

emphasizing this problem is particularly acute in rural areas. Commenting on persistent 

41 See Brainard, “Fed Listens in Cincinnati,” in note 37.
64

Fed Listens | Perspectives from the Public

transportation shortcomings, one attendee suggested that community development leaders 

should target job creation in LMI regions with limited access to high-opportunity areas. Attendees 

felt that even if workers can physically get to jobs, workers often do not possess the appropriate 

skillsets for available positions. Participants either said high-skill workers were provided 

opportunities in positions far below their capabilities or that low-skill workers were not receiving 

adequate training for open positions.

Attendees generally offered two solutions to mismatches in the labor market: Improve education 

and improve transportation. Regarding education, attendees said both schools and employers 

must improve how they prepare the labor force. One participant noted an abundance of technical 

programs at community colleges near Dayton, Ohio, that are routinely underused, and another 

said employers are increasingly recruiting workers from other locales rather than investing in local 

workers.

Other frequently mentioned issues included the ongoing effects of the opioid crisis and the 

reintegration of formerly incarcerated workers into the labor force.

Question 2: Inflation

Across many discussion groups, inflation was not a primary point of concern. One participant 

said that residents in LMI communities are generally unaware of inflation because prices are too 

high relative to the wages employers pay. Similar notes from table moderators suggest this was a 

common thought among discussants.

While LMI communities generally may not feel the relative effects of inflation, participants said, 

the rising cost of necessities does burden households. Many tables cited childcare and healthcare costs as two major points of frustration for LMI residents. One attendee told her tablemates 

that childcare “was a big problem at the YMCA [where she worked]: Paying [childcare workers] 

$10 an hour and expecting them to show up every day is unrealistic.” And while many participants 

focused on the effect of health-care expenses on residents, others mentioned that rising healthcare costs for businesses put downward pressure on wages. Beyond childcare and health-care 

costs, concerns also circulated over increases in utility bills for LMI residents.

Other Observations from Fed Listens: Frustration over Economic Indicators, Cliff Effects

Attendees voiced frustration that the official economic statistics fail to capture many peoples’ 

struggles. The following are notes from the discussions at different tables during the event:

• “Economic health isn’t what the numbers show. No resiliency among LMI communities.”

• “Many people are struggling, so how are we near ‘full employment’?”

• LMI workers are “trapped in service industry jobs.”

• “[The] federal poverty level is a joke.”

Attendees often highlighted underemployment—rather than unemployment—as a pressing 

concern in LMI communities. One participant suggested reconsidering how inflation is calculated 

for LMI residents, particularly given the fact that expenditures such as housing, utilities, and 

groceries account for a large percentage of low-wage workers’ income.
65

Part 2: Event Summaries | Federal Reserve Bank of Cleveland

Cliff effects—the loss of access to government-subsidized programs following increases in 

income—was another frequently cited challenge. Some attendees said workers often face an 

unappealing tradeoff between a relatively low-paying job versus benefits such as SNAP, affordable 

housing subsidies, and health-care coverage.

In closing remarks, President Mester noted that many of the solutions to the economic stresses 

of LMI communities and people lie outside the realm of monetary policy, but she pledged to 

bring participants’ concerns to the appropriate policymakers. “What we can do by collecting your 

comments and summarizing them is make sure that they get into the hands of the people that can 

actually make those policies.... That’s my promise to you—that we will make sure that people 

hear what you’re saying.” Governor Brainard summarized some of the main themes she heard 

from the discussion, including the lack of connection felt by some communities, such as those in 

rural areas or those seeing high incidences of opioid addiction or structural barriers tied to racism 

or people formerly incarcerated people. Governor Brainard concluded that “your insights today 

were extraordinarily valuable to us. What’s clear to me is that this expansion and continuing it are 

extremely important to create opportunities, but it’s not enough.”

A selection of comments shared with Governor Brainard and President Mester during the listening 

portion of the session: 

1. Statistics do not always measure the real things that are happening in LMI communities. There 

is a supply-and-demand problem. There are fields in which employers cannot find people to 

do the work, but there are also people working three jobs because what they really need is a 

living wage and a job with benefits. The unemployment rate does not count the people who 

have dropped out of the labor force either because of health problems or addiction problems 

or because they have already used their unemployment benefits. For some of the lower-wage 

jobs in health fields, for example, there are not enough training slots for the people available.

Some participants felt that when one invests in a community rather than in individuals, the 

benefits do not always get to the people. If one focuses on investing in businesses, for 

example, doing so may not create jobs for people in that community.

2. Benefits of a tight labor market do not trickle down to people of color and people of lower or 

low income. People do not have time for training programs that would allow them to move up 

the income ladder. There has been a systemic policy of racial bias throughout our nation for 

almost its entire existence, and policies that created racial bias have not yet been addressed.

3. Our particular community, in an under-resourced neighborhood, has an unemployment rate 

of 12.3 percent. Over 60 percent of the people there are paying more than 50 percent of their 

incomes for housing. We also recognize, from a business perspective, that the cost of health 

care drives employability. Food is very expensive, and so are utilities, making it really hard 

for low-income people to survive. We hear employers say all the time that they cannot get 

enough trained workers, but they also do not want to pay a wage that does not have the cliff 

effect. We have seen some improvement over the past five years, but not at the rate the rest 

of the state (Massachusetts) has. We do not have large employers; we do not have anchor 

institutions.
66

Fed Listens | Perspectives from the Public

4. Individuals with criminal histories are a problem because they may have the skills and the 

education, but they are not considered employable. Expunging records would help, especially 

for those with some sort of low-level drug crime. Communities of color are much harder hit 

with that than other communities. There is a gap between people who need jobs and are 

ready to take jobs and those who have the skills and the education to qualify for those jobs.

5. Some chambers of commerce in Ohio have talked about experimenting with reentry 

programs. They have been pleasantly surprised about the results, including being able to 

retain more employees. They are also realizing that they need to be more attentive about 

providing support, not only for reentrants, but also for other LMI individuals, particularly in 

terms of transportation and childcare.

6. Aggregate information and data in terms of maximum employment can be misleading for 

people of color in terms of variation on place and who is employed and who is not—on how 

those things tend not to change over time. Neighborhoods in Allegheny County, Pennsylvania, 

saw little change in the past three decades: Communities that were well off stayed well off; 

communities that were disadvantaged became a bit more disadvantaged. So just because 

there are places with high economic growth, such as in Pittsburgh, that does not mean that 

everyone is benefiting.

7. Our LMI communities have not experienced tremendous benefit from economic growth over 

the past 5 to 10 years, and that might be for a variety of reasons, whether they are physically 

isolated from where the growth is occurring or dealing with populations that have structural 

disadvantages such as criminal records or addiction problems or people who cannot find 

affordable childcare. A lot of folks are finding that it is hard to pay for their housing, so they 

are moving out into the suburbs, and they are facing increased transportation costs, and they 

are not finding jobs that pay wages that would allow them to make up that difference. We 

are also seeing people who at one point in time did have decent paying jobs, but because of 

advances in technology, those jobs no longer pay premium wages, and they are getting lowerwage jobs, and some of them are just deciding to exit the labor force.

8. Some LMI communities cannot participate in technology-enabled remote work because of a 

lack of access to high-speed internet. If companies are moving away from having employees 

in the building, what does that mean for other jobs such as cleaning, and how does that move 

affect other employment? 

9. There is a very promising program in Cincinnati that has taken the lead to design the kinds of 

processes that are needed to keep previously incarcerated people employed and to provide 

a variety of wraparound services to their employees. They found that this is the best business 

model because it produces very, very loyal employees, and they have expanded that model 

now to about 50 other companies. They are providing transportation to remote jobs out of the 

county. They are looking at the possibilities of onsite childcare. They are providing housing for 

their employees in nearby locations. So they are really going the extra mile and demonstrating 

that this is a good business practice for companies.

10. Low- to moderate-income families are having trouble providing for their families. So inflation is 

not as important. If something is so expensive in the first place, it does not matter how much 

more expensive it is later.
67

Part 2: Event Summaries | Federal Reserve Bank of Cleveland

11. Below the numbers that show the aggregate economy doing well, the lower tier of workers 

has no resilience at all. Zero. In fact, they are in deficit-resilience category. It seems to many of 

us that the economy is much more fragile than the overall numbers show.

12. Even if employers build housing near the jobs that are being created, do our citizens have the 

education that can get those jobs?

13. Overlooked is the population of people who do not have high school diplomas. They have 

the least opportunity to participate in this system, and it is important for policymakers around 

the state and in this country to figure out a way that we can engage and, more importantly, 

incentivize people who did quit high school to get back into the game. We understand that a 

lot of careers do not require a bachelor’s degree, but they all require a high school diploma or 

its equivalent.
68

Fed Listens | Perspectives from the Public

Federal Reserve Bank of Atlanta

The Federal Reserve’s nationwide Fed Listens tour came to Augusta, Georgia, on July 16. Michelle 

Bowman, member of the Federal Reserve Board of Governors, and Raphael Bostic, president of 

the Federal Reserve Bank of Atlanta, heard local business and community leaders explain how 

monetary policy and macroeconomic conditions affect their daily lives and work.

The Fed Listens events series is part of a comprehensive public review of the strategy, tools, and 

communication practices the Federal Reserve uses to achieve its dual mandate of maximum 

employment and price stability. Fed officials are aiming to reach some conclusions about possible 

changes in the overall monetary policy framework by early 2020. They will communicate what they 

have learned next year, President Bostic said.

The Fed Listens to Augusta

In Augusta, a three-person panel discussed what full employment looks like in the community. A 

second three-member panel explored the grassroots effects of monetary policy.

The following is a summary of the discussions, with questions Governor Bowman and President 

Bostic asked the panelists and questions the audience asked the panelists along with President 

Bostic and Governor Bowman.

42

Panel 1: Full Employment in Your Community

The panelists were as follows:

• Randy Hatcher, president, MAU Workforce Solutions, an Augusta-based staffing and recruiting 

firm 

• Gia Hunter, director of human resources, Textron Specialized Vehicles, an Augusta-based 

manufacturer of golf carts, snowmobiles, and industrial vehicles 

• Angela Pringle, superintendent, Richmond County School District

How is the economy working for your organization?

Hatcher said the Augusta-area labor market is the tightest he has ever seen, with job openings 

far outnumbering qualified available workers. “This is creating some interesting phenomena,” 

Hatcher said.

For one, employers are facing pressure to raise compensation. Much of that pressure has 

materialized only in the past 18 months, he noted, and so it is not yet reflected in official wage 

growth data. In general, deep-pocketed larger firms have benefited, in some cases by luring 

workers from smaller employers that cannot match the salary offers, Hatcher said.

42 A video of the discussions is available on the Federal Reserve Bank of Atlanta’s website at https://www.frbatlanta.org/about/

atlantafed/outreach/events/2019/07/16/fed-listens-augusta?panel=1.
69

Part 2: Event Summaries | Federal Reserve Bank of Atlanta

Yet even some larger 

companies are having 

trouble increasing salaries 

quickly enough to attract 

skilled people with 

numerous job options.

“Employees can move just 

about wherever they want to 

move at any time they want 

to move,” Hatcher said.

Hunter said Textron has 

increased wages and 

enhanced benefits in response to the tight labor market. For example, the company has instituted 

flexible work schedules, Hunter said.

The economic recovery has rejuvenated the Richmond County School District, according to 

Pringle. After a cumulative $188 million in budget cuts over 10 years, the school system last year 

finally returned to what officials consider full funding, she said. Its budget totaled $247.5 million in 

the fiscal year from July 1, 2018, to June 30, 2019.

During the year, rising local tax collections helped the district supplement teacher pay raises 

funded by the State of Georgia, Pringle said.

Describe the evolution from the Great Recession to now. 

During the Great Recession, Hunter said, Textron did virtually no hiring and conducted numerous 

layoffs. Now “I can’t hire fast enough,” she stated.

Richmond County schools struggled through the recession. For example, the system required 

teachers to take unpaid days off. Morale has improved after long-awaited pay increases, Pringle 

said.

Hatcher of MAU Workforce Solutions identified two stark contrasts between the recession and 

today’s economy. First, there is a marked difference in mass layoffs. During the downturn, 95 

percent of the firm’s client companies, most of which are manufacturers, let workers go. He said 

MAU laid off half of its contract workforce and half of its full-time staff.

Second, he said that compared with 2009, most MAU clients now maintain a higher share of 

contract workers relative to full-time staff. “I think everyone’s a little more cautious now,” he said.

How are you recruiting and retaining employees? Are you competing with other 

employers?

Hunter said Textron is forming partnerships to help the firm find qualified workers. The company 

works with state training agencies along with the Richmond County School District on a novel 

program to help students who are at risk of dropping out learn manufacturing skills. Textron 

prefers to promote employees from within, in part because it costs more to hire externally. Hunter 

explained that hiring from outside often entails wooing someone from a place they like.
70

Fed Listens | Perspectives from the Public

Pringle said the Richmond County School District is expanding its traditional recruiting territory 

beyond the Southeast, offering more flexible work arrangements such as four-day weeks, and 

working with local officials to help teachers acquire housing.

The system is using more agencies to train and recruit employees at all levels of the organization, 

she added. It has become difficult to find teachers, in part because many left the profession during 

the Great Recession and have hesitated to return.

Hatcher said MAU’s clients are devising “all types of creative ways to retain people.” They are 

reconfiguring shifts, as few job candidates today want to work Friday or Saturday nights, for 

instance. MAU allows one segment of its staff to work from home. That flexibility has allowed the 

company to attract people “who would never have worked for our company” before, Hatcher said.

There is debate among economists and policymakers about how “hot” to let the economy 

get. Do you see risks from a hot economy?

Hatcher said that MAU’s clients, mostly large manufacturers, are maintaining high inventories of 

products to meet strong demand, and they face rising labor costs. If the economy suddenly slows, 

he wondered whether some companies would be stuck with bloated inventories and payrolls and 

be forced to make big layoffs.

For now, he said, he sees people changing jobs for an additional 50 cents an hour without 

notifying their employer. Meanwhile, salaried workers are leaving jobs for novel reasons—Hatcher 

cited one who quit to spend time in Peru. “People would never do that 20 years ago,” Hatcher 

said. But now they are confident they can return and easily find employment. “That’s kind of the 

danger in the hot market for employers.”

Textron’s Hunter said that while talent shortages can increase costs, a hot market can also help 

firms by forcing them to rethink their processes and practices and to focus on their real priorities.

Another positive stemming from the shallower pool of available workers is that it helps some 

people find work who historically were considered unemployable, Pringle said. The hot labor 

market, she added, is forcing employers and policymakers to think harder about lowering barriers 

to employment.

Is it easy for students and graduates to find jobs in this labor market? 

Pringle said the school system has shifted from focusing on an “antiquated career path” to 

programs better suited to today’s employers. For example, schools are trying to prepare students 

for more technology-based careers in engineering and aeronautics, she said.

If the economy slows, what will be the implications for the last people hired? Will they be 

the first out? 

Textron’s product line is diversified, so the company could probably shift focus to remain profitable 

if the economy slows, Hunter said. However, she said she worries that many shop-floor workers are 

living paycheck to paycheck and therefore are vulnerable to an economic slowdown.

Hatcher said that in a downturn, the less-skilled (and thus lower-paid) workers would most likely 

feel the brunt of job reductions. Most companies, he added, would be unlikely to dismiss higherskilled employees.
71

Part 2: Event Summaries | Federal Reserve Bank of Atlanta

Pringle observed that if parents need to work multiple jobs, then they will spend less time with 

their kids. That detracts from student performance.

“When people are able to have a good wage and pay their bills and spend time with their 

children, it just makes for a better community and a better school system,” Pringle remarked.

How does inflation affect your organization? How important is predictable inflation? 

Construction costs are critical for the school system, Pringle said. Officials plan school building 

and renovation projects in five-year increments, she explained, so if costs rise more than expected, 

then the system might cancel some construction or renovation. Recently, building costs have risen 

but not dramatically, she said.

Textron decisionmakers prize stable inflation, said Hunter. The company employs analysts to 

monitor markets for the firm’s raw materials, including rubber, copper, and lead.

It costs MAU Workforce Solutions 50 percent more to hire a person today than it did three years 

ago, according to Hatcher. That is because, rather than simply placing help-wanted ads and 

fielding resumes online, today’s tight market means the company must pay staff to call prospective 

workers and visit prospects in person.

“That’s been hard for us to sustain,” he explained, because in many cases, MAU is not charging 

clients more even as its costs increase.

Does the Fed do a good job of explaining inflation, and why it is interested in inflation? 

Hatcher said the Fed should consider streamlining its websites and simplifying information it 

produces.

The other two panelists largely agreed. Pringle said teachers are seeking practical material to 

interest students in financial literacy. Hunter added that while informed, engaged citizens likely 

grasp the Fed’s work, many shop-floor workers and others do not understand how the central 

bank’s actions affect their household budgets.

Audience Q&A

How would raising the minimum wage to $15 an hour affect employment? 

Pringle said a $15 minimum wage would create challenges for the school system. In particular, a 

higher wage floor would mean raising the pay of school cafeteria workers. The federal funding that 

pays food service staff is insufficient to cover a $15 hourly wage, she said.

Textron’s Hunter said she would like to see a hike in the minimum wage. However, she added that 

it could affect the company’s finances.

Hatcher stated that he thinks private-sector companies are already increasing pay for the lowestlevel workers and that a higher mandated minimum wage would hurt those employees.

President Bostic cited a recent Congressional Budget Office report that estimated a $15 federal 

minimum wage would result in 17 million people receiving a significant pay raise and 1.2 million 
72

Fed Listens | Perspectives from the Public

lost jobs. He said policymakers and the public must ultimately judge which side of that equation is 

more important.

Panel 2: Monetary Policy and the Economy: Beyond the Headlines

The panelists were as follows:

• Jay Forrester, regional president, South State Bank 

• Ryan Hawk, executive director of business development and community outreach, Peach State 

Federal Credit Union 

• Hawthorne Welcher, Jr., director of Augusta Housing and Community Development 

Department

How is the economy working? 

Forrester described a “very strong” economy with uncertainties in some sectors. He noted that 

while most businesses are prospering, profit margins are beginning to narrow, and there might be 

bubbles emerging in industries including multifamily residential construction.

Hawk observed that confidence is high among most consumers and businesspeople, in contrast to 

pervasive gloom during the Great Recession.

Welcher pointed out that in 

low-income urban areas, many 

people are more concerned 

with daily challenges like 

paying their next power bill 

than with inflation and the 

state of the macroeconomy.

Many LMI Augusta residents, 

he added, also question why 

financial services are scarce in 

their neighborhoods even as 

property taxes increase because 

of redevelopment.

President Bostic interjected that it is indeed important to keep in mind that there are multiple 

economies—some prospering and others still struggling. He said he travels the Southeast often 

for a nuanced, ground-level view of how people are truly living, a view he emphasized he cannot 

get from data alone.

How would you compare today’s economy to the Great Recession?

Welcher said compared with today, more funding flowed into the community development sphere 

amid stimulus efforts surrounding the recession. He lamented that it took a recession to focus 

public policymakers’ attention broadly on community economic development.
73

Part 2: Event Summaries | Federal Reserve Bank of Atlanta

Hawk sounded a similar note. He said that, regardless of macroeconomic conditions, Peach State 

Credit Union strives to educate its members about financial literacy, budgeting, and the basics of 

securing and keeping a job.

The banking industry is in far better shape than during the recession, Forrester stated. He said 

regulators’ expectations are clearer, capital cushions to guard against bad loans are healthy, 

and loan quality is good. He added that lenders have not poured inordinate proportions of 

their loans into any one industry, in contrast to the heavy concentration in real estate before the 

Great Recession. At the same time, certain sectors, including multifamily real estate, are perhaps 

becoming overheated.

Is caution from the recession lingering and affecting spending, investment, and hiring 

decisions?

Peach State’s business customers are more cautious now in spending, Hawk said. Forrester added 

that consumers are also much more careful about spending, especially on major purchases such as 

homes and cars, than they were before the recession.

Is the cost of credit or the availability of credit more of a challenge now? 

All three panelists said the availability of credit is the bigger issue. Welcher and Hawk emphasized 

the importance of educating borrowers about financial basics and especially about the differences 

between traditional lenders, such as banks, and outlets, such as title pawn and payday lenders, 

in obtaining credit. Hawk noted that many potential borrowers mistakenly think they need an 

exceedingly high credit score to qualify for a loan from the credit union. “The knowledge of what’s 

available at their fingertips is key,” he said.

Are short-term or long-term interest rates more important to your customers?

Every panelist agreed that long-term rates generally are more important than are short-term rates.

Commercial customers over the past 10 years have become far more likely to borrow for terms of 

seven years and more, Forrester said. Welcher noted that housing and community development 

hinge on 30-year mortgages and 20-year development bonds.

How do your customers think about inflation? 

Answers to this question diverged. Welcher said many of his constituents do not understand 

inflation. Forrester said his bank’s business customers say costs are rising for labor and materials 

and from regulation and tariffs. “It feels like it’s starting to have an impact,” Forrester said of 

inflation.

He has noticed that consumers and businesspeople seem to consider low interest rates and low 

inflation as a “new normal.” In that context, he said, any uptick feels painful, even though inflation 

remains low by historical standards.

How well does the Fed explain inflation? 

The key to reaching the broad public is clarity, the three panelists agreed. Forrester said that while 

there is plenty of information available from the Atlanta Fed and the Fed System, it is not always 

in plain language. He noted that many Fed officials and economists seem unable to explain the 

economy in layman’s terms.
74

Fed Listens | Perspectives from the Public

Welcher noted that the most effective way to engage the public is through face-to-face outreach, 

such as the Fed Listens event.

President Bostic responded that he would continue conversations like this. And Governor Bowman 

said the session “has been incredibly enlightening for me.”

Audience Q&A

What is being done to address intergenerational poverty? 

(Note that this issue is at the core of economic mobility, one of the Atlanta Fed’s major priorities.)

Forrester said helping individuals and families climb from the lower socioeconomic rungs is a 

critical, long-term concern. South State tries to partner with groups that focus on poverty, he said.

Forrester added that educating parents and children about financial and economic literacy is 

important.

South State sponsors a mentoring program for girls who have not yet entered third grade, 

teaching basics about banking. Hawk mentioned Textron’s partnership with the school system and 

the importance of involving the parents in such efforts.

Welcher said his agency aims to fill gaps unaddressed by other programs. All three emphasized 

the importance of a “holistic approach” that addresses numerous matters and not just job skills, 

for example.

What about future retirement finances amid the possibility of cuts in Social Security benefits and 

the fact that many Americans already face difficult financial straits? (She noted a Federal Reserve 

study showing that 40 percent of adults would be unable to pay a $400 emergency expense.)

President Bostic responded that he and Atlanta Fed researchers are wrestling with the shape of 

the future labor force and with questions about when and how often people can retire. He noted 

that Americans, on average, are working much longer than they used to, in some cases because 

they cannot afford to retire or they have to care financially for parents or grandchildren. At the 

same time, evolutions are happening in family structures, life expectancy, and other areas that 

influence the family balance sheet. Ultimately, President Bostic said, the Fed must ponder what 

all of this means for monetary policy, in particular for the maximum-employment mandate and for 

economic stability and resilience.

Homeownership is generally the best basis for building wealth over a lifetime, Welcher said.

Yet owning a home is not sufficient by itself, he added. Families need to know how to manage 

finances, pay a mortgage, and buy groceries. Moreover, small business people need to know not 

just how to start a business, but also how to sustain one.
75

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

Federal Reserve Bank of St. Louis

On September 4, the Federal Reserve Bank of St. Louis hosted a Fed Listens event, one of several 

sessions held around the country as part of a yearlong effort by the Federal Reserve System to 

assess its monetary policy strategy, tools, and communication practices.

This event was held at the St. Louis Fed’s headquarters and assembled members of the Bank’s six 

advisory councils: its four industry councils (representing agribusiness, health care, real estate, and 

transportation), its Community Development Advisory Council, and its Community Depository 

Institutions Advisory Council.43

The event began over lunch with opening remarks from St. Louis Fed President James Bullard 

and Federal Reserve Governor Michelle Bowman. Following lunch, each council met in concurrent 

working sessions to discuss questions related to the labor market, inflation, interest rates, and Fed 

communications, among other topics. Then, during an afternoon plenary, the councils presented 

summaries of their discussions to, and fielded questions from, President Bullard and Governor 

Bowman.

44

The following is a summary of the key points raised by the councils in their working sessions and in 

their oral summaries during the afternoon plenary.

Agribusiness Industry Council

Labor Market

• Many council members reported that their respective (often rural) regions had higher 

unemployment rates than the national average, yet nearly all noted a challenge in attracting 

and retaining skilled and, particularly, unskilled labor. Employers on the council reported having 

a difficult time filling jobs, with reasons cited including the difficulty of attracting highly skilled 

labor to rural areas; mismatched skills to jobs; the challenges of retaining seasonal labor; and 

workers not being motivated to remain employed, as they lack a willingness and ability to come 

to work every day and on time. Council members employed in the corporate sector expressed 

less concern about finding skilled labor but noted that costs were higher to recruit and retain 

employees.

• One bright spot was the H-2A visa program, with several members noting that it is working 

quite well. One member highlighted their organization’s success in obtaining workers from 

South Africa, who are skilled, motivated, and effective. This, in turn, was helping elevate the 

performance of domestic workers. Several members commented that they hoped to see the 

program continue and expand.

• One member who works in research and development (R&D) reported that layoffs could occur, 

as regulations on ethanol from the Environmental Protection Agency have caused demand for 

43 Additional information about the advisory councils and links to membership lists can be found on the Federal Reserve Bank of 

St. Louis’s website at https://www.stlouisfed.org/about-us/advisory-councils.

44 A video of the reports and subsequent Q&As is available at https://www.stlouisfed.org/about-us/fed-listens.
76

Fed Listens | Perspectives from the Public

corn to soften in some areas. This member noted the effect of ethanol plant closures (15 plants 

to date, with an estimated 2,500 jobs lost) and predicted further plant closures and more job 

losses unless regulations change (for example, the adoption of E15 standards or the elimination 

of waivers for refiners). However, the member did express optimism that St. Louis will continue 

to be a leader in agricultural science and will drive this region’s growth.

• The majority of members reported that local labor shortages are leading them to offer more 

competitive compensation. This was split into two categories: “hard compensation,” like 

higher salaries and bonuses, and “soft compensation,” like increased benefits, retirement 

plan options, and additional vacation time. One member reported paying $400 in bonuses 

for seasonal labor, with half paid upfront and the other half paid at the end of the season, 

for the first time in the company’s history. Another member noted that the corporate office is 

trying remote working as an additional bonus, while bankers on the council reported poaching 

workers from competitors with additional compensation. There was consensus on the council 

that benefits were needed to attract a new generation of workers, but several remarked that 

these incentives were not necessarily successful in attracting more skilled labor than in the past.

Moreover, one member noted that farming requires long and inflexible working hours outdoors 

during the growing season, and that cannot be changed.

• Should an economic downturn or recession occur, there was agreement that layoffs and 

damage to farmers would likely be minimal. Some members remarked that farming was 

“already in a recession” relative to the economy overall. Council members agreed that farmers 

were already operating with high leverage, low margins, and low commodity prices. The current 

trade and tariff situation has been creating uncertainty, delaying investment, and possibly 

driving further consolidation and layoffs in the industry. Another member pointed to the high 

debt levels of farms and expressed concern about what happens in a downturn, as these farms 

have “been in the red too long.” 

• Unlike farmers and farm collectives, council members employed in the corporate sector 

suggested that their employers were likely to be more affected by a recession. These members 

also noted, however, that agribusiness already operates with a lean labor force in a cyclical 

industry, and that retirements, attrition, or simply not hiring for open positions could reduce the 

workforce naturally.

• Almost all members acknowledged the use of workforce development programs but noted that 

these programs are in their infancy. Some members have developed specific partnerships with 

industry or university groups with some success, perhaps filling a gap in the education system 

in some areas. Other council members spoke of programs—such as ACT in the Mississippi 

Delta, which trains and certifies workers—or partnerships with state departments of agriculture 

and local universities. Several remarked that workforce development programs may replace 

vocational tech training but noted that there is still a mismatch between what training is 

available and what fits with actual job requirements. Most members reiterated the need for 

soft-skills training, including partnering with high schools or other educational organizations to 

provide certification or fill the gap in education.

• The council expressed optimism on the future of R&D and automation in farming. Technological 

developments are likely to increase crop yield and productivity. The automation cited included 
77

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

self-driving farm equipment, mechanical picking (at night), use of drones (with current 

regulation preventing widespread adoption), drying crops with computers, and shared service 

centers (on the corporate side). Many members believed that automation will increase the 

demand for technical or highly skilled labor. One member remarked that the new generation of 

workers wants to implement technology, and a different skill set is needed to understand how 

computers are running the business. The council agreed that the jobs that automation could 

eliminate are typically the jobs that members cannot fill, and that automation is a way to fill the 

labor gap and to substitute capital for labor.

• One member working in R&D noted that agribusiness has benefited from technological 

advancement, with crop yields expanding twofold or threefold over their lifetime, particularly 

with genetically modified crops. The member commented that the future push will be for 

genetically modified husbandry: cow, poultry, and pig. The bigger issue for the industry is 

regulation (particularly acceptance of these crops in places like Europe). Another issue to 

address in the industry is better investment in cell and high-speed internet services in rural 

areas to implement the technological advancements mentioned. One bright spot is that new 

technology could allow skilled labor to return to farms as a viable career.

Inflation and Interest Rates 

• Council members agreed that inflation and the Federal Reserve’s 2 percent inflation target are 

“not on the top of anyone’s mind” in agribusiness. One member noted surprise that inflation 

is not higher despite the Fed employing various forms of unconventional monetary policy like 

quantitative easing during the Great Recession. Members were more concerned with crop 

price deflation and low commodity prices in general. One member remarked that he would like 

inflation, but there has been deflation in agriculture since the 2009 financial crisis.

• Most members reported that some input costs had increased, with one member noting that 

input costs for farmers have increased while input costs for livestock producers have decreased.

Others noted that fuel prices have been stable. The cost areas that were mentioned as trending 

higher were housing costs (particularly in northwestern Arkansas), general construction costs, 

and insurance rates. There was consensus that output and crop prices were dropping faster 

than input prices, creating an unsustainable business model over time for farmers.

• Nearly all members highlighted the inability to push price increases on to consumers. There 

is belief that large chains or retailers will not accept price increases, even with the uncertainty 

posed by the current trade situation. There was further discussion about competition among 

suppliers and a recognition that farmers cannot lose money forever.

• Members acknowledged that agriculture is a global industry and that American farmers are 

price takers. Some members expressed hope that the Fed would consider this point when 

determining policy rates, as the strength of the U.S. dollar directly affects agricultural exporters.

Still others noted that they do not think of the federal funds rate often and have confidence the 

Fed is setting the benchmark rate where it needs to be. Yet others commented that the rest of 

the world is lower or negative in terms of interest rates, and the United States may be too high 

by comparison.
78

Fed Listens | Perspectives from the Public

• Nearly all members noted the cost of business credit as an important issue. One member 

remarked on the very large lines of credit extended to most of agribusiness and especially 

to younger or smaller farmers that have highly levered balance sheets. There was a general 

sense that credit conditions for agribusiness are tight currently, but members clarified that this 

was due not to high interest rates but rather to preexisting high levels of debt. One council 

member said, regardless of future government payments to farmers (due to historic flooding or 

otherwise), large numbers of farmers have their credit fully extended and will receive no further 

aid through credit channels. This could force consolidation and have a domino effect in causing 

lenders to pull back on further lending to farmers with good credit.

Communications and the Role of the Fed 

• Council members expressed interest in clear, concise, and credible—even predictable—

communications from the Fed. They want to have confidence that the Fed knows what it is 

doing to help the economy. One member noted that the Fed should hike or cut rates as it sees 

fit but should explain why it was done and why it will help the economy over the long run. Then 

businesses can adjust to that accordingly.

• Council members agreed that the communications need to be in layman’s terms so that they 

are easily understandable to the public. Several members expressed the desire for consistency 

of Fed messaging, remarking that if the Fed changes its policy course, it is best for the Fed to 

explain why it is doing so and communicate that clearly so Main Street can understand it.

• There was widespread consensus that the Fed should remain apolitical and above the political 

fray as much as possible.

• Several members raised the topic of consistency, noting that it is confusing for there to be so 

many Fed officials making comments and opining about Fed policy and decisions in times of 

uncertainty. Some council members said that the Fed should act like a board room where, even 

if there is spirited debate and disagreement behind closed doors, once a decision has been 

made, there is solidarity among officials that they took the optimal path of policy. Another 

member remarked that the economy has been good for a long time, so the Fed must be doing 

something right.

• In terms of community-related issues, the council agreed that educating rural communities on 

finances and debt is important for agribusiness. Other issues noted in the discussion were a lack 

of infrastructure (such as roads and cell service), poor education, and trouble attracting skilled 

labor in rural areas. Many on the council feel there is a divergence between national and rural 

economic trends.

Community Depository Institutions Advisory Council

Labor Market 

• The current low unemployment rate is supporting local economies in the Federal Reserve’s 

Eighth District. But retaining employees or hiring new ones is becoming increasingly difficult 

as labor expenses rise across the board. At higher levels of employment, some banks poach 
79

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

talented lenders from one another with significant signing bonuses. Wages for tellers paid by 

some banks are also increasing.

• Banks have responded to job market pressures with wholesale 

policy changes involving expanded benefits, including 

more vacation, more flexible hours, better health-care 

options, better retirement programs, and college tuition 

reimbursement programs. Smaller banks, in particular, offer a 

culture that balances work and life (encouraging employees to 

attend their children’s school events, care for aging parents, 

and so on). “Creativity” in hiring, benefits, and work–life 

balance is becoming increasingly necessary.

• Part-time and temporary employees are increasingly being used to supplement core 

workforces. This provides a buffer against a potential economic downturn. In this regard, 

however, bankers do not foresee any significant staff reductions in the near future. Bankers also 

stated that they were further insulated from future downturns by “lessons learned following the 

Great Recession.” Workforce development occurs privately within firms through various training 

programs. One bank is figuring out a way to train internally: “If we can’t find talent, we create 

it.” Initiatives include formal training programs and, increasingly, student internships. Public 

initiatives, alternatively, provide free tuition to community colleges and technical schools for 

high school graduates as well as adults. High school students benefit from technical training 

programs. Access to universities is advantageous.

Inflation and Interest Rates 

• Inflation is not considered an issue at this point, but bankers are concerned about the effect 

of inflation in particular industries, such as health care, education, and pharmaceuticals.

Some regions of the Eighth District are being affected by wage increases mandated under 

state minimum wage laws. Fierce competition limits the capacity of banks to pass on higher 

operating costs. Eventually, costs could be passed on to consumers, but bankers generally 

agreed that “we’re not there yet.” 

• Bankers are concerned about the yield curve, noting that it is “difficult to make money with 

an inverted yield curve.” Some bankers suggested that the fed funds target rate might be too 

high.

• Pressure to increase prices to offset higher labor costs is being offset by increases in 

productivity, particularly in information technology, which has reduced back-office costs.

Bankers are seeing an increase in their ability to automate mundane tasks through technology.

A large slate of new and emerging financial technologies is enabling banks to deliver 

accessibility at lower cost. Neural networks to detect credit card and other fraud are increasingly 

being used.

Communications and the Role of the Fed 

• Fed communications, overall, were described as “positive.” Bankers said the Fed is managing 

the economy well in a very challenging environment. However, they strongly emphasized 
80

Fed Listens | Perspectives from the Public

the importance of the Fed’s independence from political and other influences: Actual and 

perceived independence was seen as “more important than ever.” 

• Bankers noted that comments by Fed officials are no longer parochial; they echo around the 

world. As a result, they stressed that the Fed needs to “speak with one voice” to create stability.

One banker touted the advantages of the approach used in bank board rooms: “When board 

members meet, there may be disagreement, but when they come out, they are unified.” 

• Bankers said the Fed should not rigidly defend a commitment to a previous statement if data 

change. Bankers generally agreed that there can also be “too much transparency,” which 

can serve to confuse markets. Bankers also identified several emerging issues they believed 

warranted attention by the Fed, including a lack of banks in rural areas, student loan debt 

(“There are young people coming out of college with a mortgage-sized debt but no house to 

go along with it”), and a lack of access to small-dollar lending.

Community Development Advisory Council

Labor Market 

• Council members 

agreed that the national 

unemployment rate—

currently at a record low 

of 3.7 percent—is not 

necessarily reflective of 

what the people in the 

communities they serve 

are experiencing. The 

unemployment rate among minorities, especially African Americans, and in rural places, like 

Arkansas and the Mississippi Delta, is much higher than the national rate.

• Labor force participation rates are also lower than what they were before the Great Recession.

Several members of the council suggested that issues such as the high costs of childcare, lack 

of transportation, lack of affordable and quality housing, large employers overusing temporary 

workers, high incarceration rates, and the opioid epidemic are inhibiting many Americans from 

fully participating in the labor force.

• There was a consensus among members that there are many additional barriers to employment 

that exist in their communities. They identified groups like the formerly incarcerated, nonwhite, 

disabled, immigrants, and veterans as being the most affected by these barriers.

• Members from the Louisville region noted that while jobs in the service, retail, and logistics 

industries are bountiful, they do not pay wages that are sufficient enough to sustain a living.

• The council identified various opportunities as means of improving the conditions of the labor 

market, including 
81

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

o offering free tuition for community college students

o collaborations among various industries and sectors

o loosening hiring requirements (including eliminating marijuana testing and increasing hiring 

efforts for applicants with criminal convictions)

o offering a low-interest loan product to help immigrants get certified in varying professional 

services

• A member noted concern about the number of service jobs being greatly reduced because of 

pending automation and artificial intelligence.

• The council highlighted workforce development programs like Kentuckiana Builds (which offers 

free training and job placement) and SLATE (St. Louis Agency on Training and Employment, a 

Missouri job center that provides a variety of free employment services).

• Council members perceive that many areas in the Eighth District are experiencing an 

overreliance on temporary workers instead of hiring full-time workers with benefits.

Inflation and Interest Rates 

• There was a consensus among the council that the availability of credit and cost of credit are 

salient issues for their communities, and the rates and costs have a disproportionate effect on 

LMI groups.

• A member stated that most people with low incomes can afford a home in a low-cost 

neighborhood, but few qualify for a decent mortgage rate, if a mortgage at all.

• The council discussed the possibility of the Federal Reserve aiding CDFIs in compiling data 

on the availability of credit and interest rates, especially considering the historical and residual 

implications of redlining.

Communications and the Role of the Fed 

• The council also noted the value provided by the data, research, and analysis the Fed has done 

regarding LMI communities.

• There was a consensus among members that the Fed continues to use its voice in addressing 

historical inequities.

• Council members stated their appreciation of the Fed for being a nonpolitical convener that 

consistently brings together leaders and individuals from diverse groups and backgrounds to 

discuss the issues of LMI communities.

Health-Care Industry Council

Labor Market 

• Overall, the council members generally agreed the labor market for health-care workers is 

tight, leading to higher wages and benefits. Employers on the council largely agreed it was 

hard to find skilled workers to fill open positions. Companies have tried to address this via 
82

Fed Listens | Perspectives from the Public

initiatives such as increasing benefits offerings, accepting candidates with fewer skills, lowering 

requirements for employment, seeking out nontraditional portions of the labor market (for 

example, college students and people coming out of retirement), and offering unconventional 

benefits. Some council members said a general trend in the industry was a shift to more flexible 

working environments, particularly when it came to scheduling and telework.

• Some of the unconventional benefits the 

members mentioned as being offered 

included financial and employee wellness 

programs, as well as 401(k) matching and 

insurance for employees who were not 

previously getting those benefits. Several 

council members said they were seeing 

more applicants for positions who did 

not strictly meet the job requirements 

(for example, having an associate degree 

instead of a bachelor’s degree), while others mentioned that employers in the industry were 

considering more lenient requirements, if possible, when it came to criminal past and drug 

testing.

• Most council members saw upward pressure on wages as well as the need for additional 

financial compensation measures. For example, a few members of the council reported that 

new nurses could see starting bonuses of as much as $20,000. They noted that firms were also 

offering increases in retention bonuses, and that employers were increasing the budgeted 

amount for employee insurance programs. In addition, one council member in the health-care 

technology field noted that firms’ equity valuations were high, and that some companies were 

offering equity incentives as a recruitment tool, particularly when trying to attract employees 

from the West Coast.

• With fewer qualified workers, several council members noted that employers were finding new 

ways to be productive and innovative with a smaller workforce. Some pointed out that there are 

already “abandoned markets” where there are fewer available workers, and that was breeding 

innovation. Also because of the tight labor market, health-care companies across the District 

were emphasizing an investment in students and training programs. Several council members 

reported that more firms were funding education and training programs.

• The council anticipates that the labor market in the health-care industry will continue to tighten 

even in the event of an economic downturn, mostly because of an aging workforce and an 

increase in demand from an aging population. Council members generally expected that the 

number of health-care providers will decline, with retirements expected to be high in the next 

5 to 10 years. There was concern among many of the council members about how to backfill 

those jobs, particularly when training can take as long as 8 years in the case of doctors or when 

technology changes rapidly and skills quickly become outdated.

• Demand in health care is somewhat disconnected from the broader economy, the council 

noted, and therefore most do not expect large layoffs in the event of a recession. Staff turnover 

in the health-care industry is already generally higher than in other industries, so if the economy 
83

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

slows, most of the council members expect hiring to slow and lower employment to happen 

through attrition.

• One member in the health-care technology field noted that, in some ways, remote working 

has made it harder to find workers. With the rise of telework, employees can work for a San 

Francisco firm from their home in Tennessee, for example. On the flip side, council members 

pointed out that, because people can work virtually, local firms can find and recruit workers from 

around the United States.

• Finally, the members noted that while the labor market in the health-care industry in the 

aggregate was tight, there were still parts of the District—particularly in LMI communities—that 

were experiencing higher levels of unemployment. The council was generally hopeful that if low 

unemployment is sustained, more organizations will reach out to and employ more people in 

such communities. To reach workers in these communities, the council saw a need for offering 

financial training and deferred compensation plans for individuals who do not necessarily want 

to see rising wages because of childcare benefits and other subsidies. It was not clear if these 

benefits were being used in the industry.

Inflation and Interest Rates 

• Most of the council members agreed that the current level of inflation was good, with several 

members expressing their expectation that inflation would not become an issue in the near 

term. The council noted that higher inflation itself is not necessarily a problem for the industry, 

in general, as long as any increase in inflation is modest, predictable, and slow moving. Many 

noted that inflation in the health-care industry is generally higher than in the overall economy, 

so inflation a bit higher than 2 percent was not a big deal for most council members. Those 

members agree that stability matters more than the actual level.

• Council members also generally agreed that interest rate levels are still manageable. Several 

members of the council representing hospital systems said they would see an effect over the 

longer term if interest rates were to rise, but that they would not expect to see an effect in the 

shorter term. Several council members involved in the financing side of the health-care industry 

generally noted that access to credit overall is easy. Still, these members pointed out that they 

expected the industry to continue to invest in new technology and not in new hospital systems 

and other brick-and-mortar expansions in the near term.

• Some of the council members agreed that one negative when the Federal Reserve tries to 

adjust the interest rate to give cushion against a potential downturn is that the stock market 

has an outsized effect, and that affects income statements. One member said the current 

interest rate level was manageable but also worried lower rates could reduce the Fed’s ability to 

respond to a recession.

• One council member pointed out that the low interest rate environment can hurt aging people, 

a group that is normally the largest consumer group of health care and that does not participate 

in the stock market and instead invests in low-return, risk-averse certificates of deposit. Council 

members noted that it was important for monetary policymakers to think about how inflation 

and interest rates are affecting families that cannot afford lines of credit to borrow on and are 
84

Fed Listens | Perspectives from the Public

not saving money or earning much interest off savings that could help them offset costs of 

health care.

• The council reported that businesses in the health-care industry are generally more highly 

leveraged in areas they have not been in the past, due to rapid changes in technology that 

incentivize leasing or temporarily financing equipment. Just as households are turning toward 

renting houses and leasing cars rather than buying, businesses are leasing equipment more, 

a member pointed out. One health-care system member noted that 70 to 80 percent of their 

equipment is leased, and another noted that the lifespan of health-care equipment is changing 

quickly, with things becoming obsolete faster.

Communications and the Role of the Fed 

• Council members were mostly pleased with the level of transparency coming from the Fed.

They noted that transparency was important for investment decisions, with one member saying, 

“Transparency leads to clarity, clarity leads to confidence, and confidence leads to investment.” 

Overall, the members noted that the Fed is still very highly trusted by the industry.

• That said, the council also noted that the industry— including the council members present—

probably understands the Fed better than most people. One member summed it up: “It’s not 

clear how much the general population understands about what it’s hearing.” Another member 

suggested that the Fed could be out there more and making efforts to better educate everyone 

on the Fed and its decisions.

• The health-care council members generally expressed appreciation for the opportunity to 

interact with the Fed, noting that there were other opportunities for the central bank to connect 

with the local community. Many council members encouraged the Fed to do a better job of 

communicating in communities of color and communities that are unbanked or underbanked. It 

was also mentioned by council members that the Fed should find ways to engage with a more 

youthful demographic. Several called on the Fed to better educate people about monetary 

policy and how to interact with banks, with one suggesting additional outreach in high schools 

and colleges.

• While council members generally expressed appreciation for more transparency, one 

member noted that the FOMC press conferences and statements were enough, and that 

they appreciated a succinct reasoning of the decisions. The council discussed how much 

transparency is too much, with the majority noting that transparency on goals and decisions 

is good, but fighting on Twitter and in public is not. At least one member noted that more 

openness from the FOMC in the past 10 years has more clearly shown the differing views on the 

FOMC, which may be hindering a unified message.

• All members of the council agreed that the Fed needs to remain politically independent and 

“stay above the fray,” with one member saying this independence is “essential” and another 

saying policymakers need to avoid being dragged down into “the swamp.”
85

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

Real Estate Industry Council

Labor Market 

• All members reported that the labor market is tight.

St. Louis members reported that the strength of area labor 

unions and their opposition to recruiting nonlocal labor 

have made it harder to attract workers from other cities, 

with particular difficulty in the construction business, as 

older workers retire while others are growing weary of long 

hours and declining to work weekends or overtime.

• A St. Louis member reported that the area’s labor shortage 

is resulting in a cap on company expansions as firms 

assess the labor market’s dynamics and choose to look 

elsewhere. St. Louis members also reported widespread 

delays in the completion of construction projects 

throughout the region due to the labor shortage.

• Firms have had to adopt creative ways to entice people into trade-related jobs. For instance, 

St. Louis City has an apprenticeship program specifically targeted toward women and minority 

groups. Several Eighth District cities have also introduced academies in high schools (and even 

in middle schools) that equip students with the technical skills needed to enter the job market 

right out of high school without higher education.

• A Little Rock member noted that area school districts are forming academies dedicated 

to health care, information technology, and construction. A Louisville member described 

similar academies, adding that area businesses are incentivized to assist in these workforce 

development programs given their need for skilled labor.

• Members from Louisville also talked about the adverse effect that Amazon is having on the 

job market in outlying areas by offering competitive wages and good working conditions. It 

is making it harder for smaller firms in these outlying markets to attract labor, and it is also 

dissuading other companies from moving to the region and trying to compete with Amazon.

• Members reported that the hospitality sector was dealing with labor shortages by adopting new 

operating procedures that require less labor. Examples include awarding more reward points 

to customers who opt out of daily cleaning (thus cutting down on the cleaning staff), switching 

to materials that do not require heavy cleaning, and replacing single-use toiletries with larger, 

pump-topped bottles.

• All members agreed that the real estate market would have to find ways to incorporate 

underused labor sources, including both potential employees who are recovering from 

addiction or mental illness and applicants with criminal convictions who seek to reenter the 

workforce.
86

Fed Listens | Perspectives from the Public

Construction 

• Members reported dual trends of downsizing and increased density, in both residential and 

commercial real estate. In residential real estate, members reported that there was increased 

demand for small- to medium-sized homes, with interior amenities plus lifestyle features like 

walking trails and centralized green spaces. In commercial real estate, members cited a turn 

toward modularization in construction along with increasing demand for open floor plans, which 

allow firms to densify their operations and reduce leasing expense.

• Most members reported a wave of downsizing in office construction. A member reported that 

a major firm in downtown St. Louis is trying to accommodate triple the number of its current 

employees in the same office space by renovating the building with an open floor plan.

• A member from Louisville underscored that occupancy rates for office spaces used to be a 

good metric to study employment conditions. However, the shift to open-plan offices has 

reduced the accuracy of this metric.

• A member from Memphis reported a healthy demand for commercial construction. They 

observed that nearly 30,000 square feet of office space was undergoing reorganization to bring 

different parts of firms under the same roof, since Memphis is cost effective relative to other 

cities. The member further noted that there was around $9 million of speculative construction 

under way in Memphis.

• A member from Little Rock reported that the rise in construction costs has severely limited 

speculative construction. Members from Louisville and Little Rock also reported that landlords 

are no longer willing to spend the money to renovate older buildings, because they are unable 

to keep up with the rising labor and material costs.

• Another construction trend reported in the hospitality industry, in particular, is panelized 

construction, in which the structural components of, for example, a hotel room are assembled 

in a central factory—including built-in mechanical systems, duct work, and even furnishings—

and then shipped as a fully assembled pod to the construction site, significantly reducing or 

eliminating the need for local labor for onsite assembly. This trend enables hotels and other 

companies to minimize the uncertainties and costs associated with local labor shortages as well 

as the variability in quality of local assembly.

Inflation and Interest Rates 

• Most members were ambivalent about the potential effect of inflation above 2 percent. Some 

members stated that they would welcome higher inflation to some extent if it would help raise 

wages and, in turn, lead to increased consumer spending. Many members, though, were averse 

to higher inflation in input prices and noted that it is difficult to square a figure of 1.7 percent 

inflation with construction cost increases of 15 to 20 percent in recent years.

• Members also stated that since inflation has been low and stagnant for several years now, it 

would be hard to visualize a high-inflation environment.
87

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

• A member from Kentucky stated that it would be difficult to determine how higher inflation 

would affect the hospitality sector, given recent changes in the industry. In particular, the shift in 

travel decisions from a six-month to a six-week window due to technological enhancements that 

make reservations easier for travelers was cited.

• Members also noted that higher inflation would have varying effects by demographic groups 

and regions. Members argued that regions in Kentucky, for example, with cheaper input costs 

may be more resilient to higher inflation than regions in states such as Illinois where new or 

higher state fees and taxes have been instituted to address budget issues.

Communications and the Role of the Fed 

• All members stated that the Federal Reserve’s efforts toward transparency have been 

appropriate and welcomed, and many members cited transparency as being particularly 

effective for those who understand the Fed as well as the economy. A concern by some 

members is that other audiences who do not understand the Fed may tend to oversimplify and 

criticize the Fed’s decisions. Also, some expressed a concern that transparent communication 

somewhat diminishes the aura of mystery around the Fed that some may have seen as a 

positive.

• Some members suggested that the Fed consider tailoring the complexity of its message 

according to its audience, since audiences have greater trust in information that they 

understand.

• Members also stated that the uncertainty surrounding interest rate changes is problematic 

for the real estate market. It is not the actual movement of rates, one member said, but the 

perception that there might be movement, coupled with lack of certainty of the timing and 

amount of a rate increase, that can cause market concerns. More predictability and consistency 

in rate moves might be better, some members suggested.

• All members expressed their desire to see the Fed continue to be unbiased and apolitical.

The members said that the public views the Fed as a nonpartisan authority, and so it would 

be beneficial if the Fed were to better publicize its economic reports and publications that 

exemplify its strength in serving as a neutral, informed provider of economic information.

• Several members also stated that they would like the Fed to mediate in the lending market for 

low-income housing by easing regulatory standards, noting that housing affordability concerns 

continue to be widespread.

• Some members stated that they would like to hear the Fed talk more about how global 

conditions—such as Brexit or China’s slowdown—might affect the real estate sector. One 

member noted that the Fed is viewed as a thought leader and that thoughtful audiences will 

appreciate hearing the Fed’s point of view on these key international issues.
88

Fed Listens | Perspectives from the Public

Transportation Industry Council

Labor Market 

• Council members uniformly expressed concern about the increasingly tight labor market in 

the current period of economic growth. The supply of jobs continues to grow faster than the 

rate of qualified workers, with one council member describing it as a “rat race to find qualified 

people.” 

• A prime reason cited for the labor shortage is a decline in vocational and technical education 

in high schools. More and more, there is a mismatch between skills that are needed and skills 

that students emerge with after graduating from high school or college. Following high school, 

parents tend to steer their children toward “prohibitively expensive” four-year colleges under 

the assumption that transportation and manual-labor jobs are undesirable. One member talked 

about the challenge of changing mindsets after generations of sending a message that one 

needs to go to college to be a success. Meanwhile, labor shortages in some parts of the District 

are being addressed by immigrants, such as Bosnian and Uzbekistani immigrants in the St. Louis 

area taking jobs as truck drivers.

• While employers in the transportation industry cope with labor shortages, workers are reaping 

the benefits. Companies have taken steps to entice employees with incentives related to 

wages, benefits, flexible scheduling, vacation time, and parental leave. Employees are 

increasingly expecting and demanding a work lifestyle conforming to less time on the road 

and more time with their families. A Memphis council member said that employees “hold the 

key to the bank if they have a good skill set,” and that Memphis companies commonly “steal” 

skilled workers from each other. There was general agreement among council members that 

employees’ lifestyle expectations will not reverse course, meaning that employers will need to 

find innovative solutions to address their demands.

• As an example of how workers are benefiting, technicians at a District truck and refrigeration 

company average $60,000, with several earning over $100,000. In addition, there is a need at 

a District airport for trained and licensed electricians as well as for plumbers, pipefitters, and 

HVAC (heating, ventilation, and air conditioning) workers.

• Although jobs have become harder to fill, signs of optimism are emerging, including 

greater efforts to build a pipeline among K-12 students. There is enhanced emphasis on 

apprenticeships and innovative workforce development solutions as well as incorporation of 

Occupational Safety and Health Administration training in some high schools so that students 

can receive proper certifications before entering the workforce full time. The Kentucky FAME 

(Federation for Advanced Manufacturing Education) program, originally started by Toyota, was 

cited as a success story. This industrial maintenance and technician program has been adopted 

by the state’s 16 community colleges. It is a five-semester program in which students work three 

days a week and go to school for two days. Each year, about 1,000 students graduate from the 

FAME program and are qualified for industrial maintenance jobs.
89

Part 2: Event Summaries | Federal Reserve Bank of St. Louis

• As another method to counteract the labor shortage and expand the pool of potential hires, 

members discussed the increasing willingness to, in some cases, relax policies related to typical 

employment disqualifiers such as criminal offenses and drug use. At one distribution center, 

a member mentioned that 57 percent of recent applicants failed the drug test. The marijuana 

issue is particularly challenging because, even though there are states in which marijuana is 

legal to varying degrees, it is still illegal under federal law. For those people who may have 

done “one stupid thing” in their past, a council member said that companies should give them 

hope by providing training to help them jump back into the workforce.

• Nevertheless, in an industry in which safety is a vital concern, there is still hesitation toward 

overlooking certain offenses or forgiving failed drug tests for applicants in jobs considered high 

risk and safety sensitive. A rail representative said that he cannot envision his sector voluntarily 

relaxing polices related to drug and alcohol use.

• Although there is some applicability of robotics and artificial intelligence in the transportation 

industry to fill the labor void, there is more focus on refining the process and using data analysis 

to make better business decisions. One council member described his business as highly 

technical and analytical, while an airport representative said that human interaction is still 

important for security reasons.

• Innovation in the industry is centered on preventive maintenance and expediting repairs, more 

so than on advancements in new automation. The primary focus is on eliminating waste and 

inefficiencies within processes and equipment that already exist. In the case of autonomous 

trucks, adoption will move slowly, though it is already taking root in ports. With fewer people in 

tightly controlled environments such as ports, driverless vehicles create less of a safety concern 

while leading to a better understanding of how autonomous systems work.

Inflation and Interest Rates 

• A few council members expressed that they are okay with occasional spikes in inflation because 

it stresses the system and weeds out weaker businesses while enabling stronger and more 

innovative businesses to gain market share. They indicated that some amount of inflation 

adds discipline to business practices and brings a degree of rhyme and reason to growth. As 

one member put it, “Bad practices are developed in good times.” But because the industry 

operates on thin margins, continued inflation of a year or longer is considered undesirable.

• It was mentioned that inflation has an effect on a company like Walmart, which strives to deliver 

the lowest prices for customers. Any semblance of inflation prevents the retailer from realizing 

that goal. Said the council member, “To be everyday low price, you have to be everyday low 

cost.” 

• Higher inflation typically has an effect on consumer travel. Families will take staycations rather 

than making road trips or booking flights. Businesses tend to cut back on travel and use Skype 

for meetings.

• One council member mentioned that new car sales are down 4 percent nationally, as more 

buyers are opting to purchase used vehicles.
90

Fed Listens | Perspectives from the Public

• Council members’ greater concern is with global trade and tariffs, with a couple members 

pointing out the disruptions that are caused by tariffs.

• Another issue that was raised is the rise of electromobility in the transportation industry, which 

results in lower fuel taxes. One council member said that if a solution for the fuel-tax loss due to 

the rise of electric vehicles is not figured out, it will negatively affect the needed repairs of the 

nation’s roads and bridges. The fuel tax is largely what funds road and infrastructure projects.

Similarly, the increased amount of fuel-efficient cars on the road also results in less fuel tax 

collected.

• Council members did not have strong feelings on whether the federal funds rate is too high or 

too low. One member said that it is hard to gauge a right answer and that it is probably as low 

as it needs to be.

Communications and the Role of the Fed

• Council members were very positive about Fed communications. In general, the members 

expressed the opinion that more communications are preferable. They said that if the Fed does 

not tell its story, then others will tell it instead, complete with inaccuracies.

• Members said that they seek stability and clarity from the Fed. With issues like Brexit and trade 

disputes swirling and creating so much uncertainty, investors become reluctant. In such an 

environment, it is especially crucial for the Fed to stay the course with transparent, open, and 

honest communications.

• There was a strong desire for the Fed to remain apolitical and continue to take a measured 

approach by making intelligently informed decisions that are not influenced by politics.
91

Part 2: Event Summaries | Federal Reserve Bank of San Francisco

Federal Reserve Bank of San Francisco

On September 26, the Federal Reserve Bank of San Francisco held a symposium and town 

hall discussion titled “A Hot Economy: Sustainability and Trade-Offs.” This event was part of a 

broader effort within the Federal Reserve System to review the strategy, tools, and communication 

practices the Fed uses to pursue its monetary policy goals as established by the Congress: 

maximum employment and price stability. At Fed Listens outreach events throughout the country 

this year, the Fed has heard from researchers and community members about the design of 

monetary policy and its effects on economic conditions overall and across different population 

groups and regions.

The San Francisco event focused specifically on assessing the upsides and downsides of a 

“hot economy,” with sustained above-trend economic growth and tight labor markets. This 

assessment is appropriate and well timed because the current economic expansion appears to 

have reached a record for sustained growth based on historical records back to the 1850s, and 

the national unemployment rate has reached a 50-year 

low. The event included presentations and discussions 

by researchers; members of community, government, 

and labor organizations; and business leaders. About 

150 people attended from a similar broad cross section 

of stakeholder groups and the general public. The event 

was available to an online audience via livestreaming. In 

addition, all invitees received a questionnaire before the 

event; the appendix summarizes their responses.

Opening Remarks

San Francisco Fed President Mary Daly opened the event with a warm welcome that emphasized 

the Federal Reserve’s commitment to hearing a wide range of viewpoints on the practice and 

effects of monetary policy via the Fed Listens program.

Federal Reserve Vice Chair Richard Clarida set the stage for the day by explaining this year’s 

Systemwide review of the Fed’s monetary policy strategy, tools, and communication practices. As 

he noted, the importance of the review is reinforced by changes in national and global economic 

conditions that affect the conduct of monetary policy. The primary changes are both a reduction 

in the “neutral” policy interest rate that neither supports nor impedes stable economic conditions 

and an environment of low inflation that reflects a limited response to conventional measures 

of idle resources such as the unemployment rate. This new environment raises questions, such 

as whether sustained undershooting of the 2 percent inflation goal in recent years might be 

effectively balanced by overshooting in the future. The overall review process pairs such research 

questions with public perspectives on the effects of specific monetary policy goals and choices.

Douglas Elmendorf, dean of the Harvard Kennedy School and former director of the 

Congressional Budget Office (CBO), provided an overview of the benefits and potential costs of 

a hot economy in his opening keynote. He noted that tight labor markets tend to improve the 

relative labor market status and income gains for traditionally disadvantaged groups, such as 

racial and ethnic minorities and the less educated. This typically comes at the risk of an unwanted 
92

Fed Listens | Perspectives from the Public

increase in inflation, although the current low-inflation environment lowers that risk and calls for 

some experimentation with monetary policy. Both the presentation and the subsequent Q&A 

discussion emphasized that, because monetary policy alone is not sufficient to achieve ideal 

economic outcomes, other policymakers can play an important role. These include state and local 

governments, which may be more effective than the federal government in targeting policies to 

the groups and regions that need it.

Research Panel 

The research panel presentations provided an analytically based discussion of the benefits and 

tradeoffs inherent in a hot economy.

Jason Furman from the Harvard Kennedy School emphasized the favorable labor market effects 

of the prolonged expansion, which has not only produced a very low unemployment rate, but has 

also counterbalanced structural pressures pushing down prime-age labor force participation. He 

noted that wage gains net of price inflation have been positive in recent years, especially for those 

whose wages put them near the lower end of the distribution.

Heather Boushey of the Washington Center for Equitable Growth also discussed the favorable 

effects of accommodative monetary policy on low-wage workers. However, she stressed that longterm economic factors and perhaps also unconventional monetary policy tools, such as large-scale 

asset purchases, have contributed to a long-term trend of rising inequality of income and wealth.

Douglas Holtz-Eakin from the American Action Forum, also a former CBO director, elaborated on 

some notable downsides to a hot economy. These include excessive price increases for important 

items such as housing, coupled with rising risks of unwanted overall inflation; potential financial 

instability that could threaten the expansion; and risks to Fed independence in response to a 

perceived focus on hot-button issues such as rising income inequality.

Sarah Bohn from the Public Policy Institute of California discussed the desirable reductions in 

poverty arising from sustained economic growth. However, she also emphasized features of 

the California economy that have kept poverty above the national average even when the state 

economy is doing well. These include the high cost of living and the large number of low-wage 

jobs that are created even in a strong labor market.

The Q&A discussion focused primarily on the uneven distribution of the benefits and costs of a 

hot economy. Lower-income families are particularly exposed to the sharp increases in housing 

costs and prices of other services that often accompany hot economic conditions. Commenters 

noted that low interest rates associated with accommodative monetary policy tend to help existing 

homeowners via higher property values but may harm renters, whose rents rise. In response 

to a question, panelists expressed little concern about any potential downside from reduced 

educational investments due to improved job opportunities when the labor market is hot.

Community Panel 

The community panel provided an opportunity to gain perspectives from individuals who directly 

observe the economic conditions faced by disadvantaged population groups.

Carolina Reid, an associate professor of city and regional planning from the University of 

California, Berkeley, set the stage for the discussion by providing an overview of the challenging 
93

Part 2: Event Summaries | Federal Reserve Bank of San Francisco

economic conditions many communities face despite the 

hot economy. She emphasized the growing disparities 

in income, job benefits, wealth, housing costs, and 

access to credit across different groups in San Francisco 

and other California cities despite generally favorable 

economic conditions. These broad disparities show little 

response to accommodative monetary policy and a hot 

economy, which highlights the importance of vigorously 

enforcing the Community Reinvestment Act and state 

and local policies to support disadvantaged groups.

Carmen Rojas, the cofounder and CEO of the Workers Lab in Oakland, echoed those comments 

by focusing on the limited benefits from the hot economy for low-wage workers in the San 

Francisco Bay Area and throughout the country. In the face of very high costs of living, many of 

the jobs created in recent years do not provide the wage rates, benefits, and work hours needed 

to adequately support families. This leaves many families in precarious financial situations. The 

persistence of these conditions has created a great deal of pessimism and disengagement for the 

communities with whom she works.

Isela Gracian, the president of the East Los Angeles Community Corporation, discussed the 

myriad challenges facing the low-income population in that area. Many of the residents are 

recent immigrants, often employed as street vendors. They face steep challenges in finding and 

maintaining stable employment and housing—or even gaining basic levels of public acceptance 

and a sense of personal safety. Gracian emphasized that “the population we work with [is] 

always feeling a strain, whether the economy is hot or not.” Her portrayal of their circumstances 

suggested that any income increases from a hot economy are eclipsed by the increased housing 

costs and related challenges.

Carrie Cihak, chief of policy for King County, Washington, emphasized the wide economic 

disparities in the Seattle area and statewide. This reflects that many of the workers in highly paid 

sectors have been imported from out of state rather than “homegrown.” For example, in contrast 

to the prevalence of highly paid tech and engineering jobs in her area, the state ranks quite low 

in high school graduation rates. Overall, she emphasized that she sees a “dual economy”: It is 

hot and, hence, very favorable for some groups but leaves others “getting burned,” falling off the 

path of economic opportunity and with little chance to get back on. Given the many low-wage 

jobs being created, Cihak noted that the Fed might consider thinking in terms of “fulfilled” or “full 

potential” employment rather than simply “full” employment; this aligns with the broader concept 

toward which her county’s agencies are working.

The Q&A discussion revolved around the panel’s observations about limited opportunities for 

advancement, despite the hot economy, in the absence of specific policy measures aimed at 

disadvantaged groups. Commenters noted that less restrictive housing regulations and a more 

proactive approach to low-income housing might help alleviate some of the challenges created by 

rapidly rising housing costs in urban areas. Regarding whether a strong economy makes it more 

or less challenging to achieve favorable outcomes for low-income groups, the panelists generally 

indicated a mixed or neutral stance. One panelist noted that people struggling to make ends 
94

Fed Listens | Perspectives from the Public

meet face an adverse psychological effect when the public perception is that the economy is 

strong and working to everyone’s advantage.

Business Panel

The business panel provided a broad perspective on how companies and employees in a wide 

range of sectors have responded to the long expansion and tight labor markets. The panel 

consisted of the following individuals: Chip Childs, CEO of the airline company SkyWest, Inc.; 

Patricia Richards, CEO of SelectHealth, which administers health insurance plans throughout Utah, 

Idaho, and Nevada; Rosemary Turner, president (retired) of UPS Northern California District, the 

worldwide package delivery and logistics company; and David White, national executive director 

for SAG-AFTRA (Screen Actors Guild-American Federation of Television and Radio Artists), the 

world’s largest union for entertainment industry employees.

The panelists generally emphasized that despite the long 

expansion, their industries have grappled in recent years 

with long-term challenges for their business models and 

bottom lines. They cited a highly competitive product 

environment, often on a global scale, that merits cautious 

business strategies despite strong economic conditions.

They also noted that the growth of international 

competition and globalized markets requires stable trade 

relations for sustained industry growth.

This competitive environment creates the need for continued innovation in their products and 

processes. Much of this takes the form of automation and other labor-saving innovations, which 

hold down growth in labor costs despite the tight labor market. New technologies are likely to 

undermine growth in some job categories, such as package delivery workers who may be replaced 

by automated drones. Although industry expansion in response to improved efficiency is expected 

to create new, different jobs that replace the jobs lost to automation, many of those jobs are likely 

to require additional training for existing or new staff.

One key question is whether widespread labor shortages are affecting compensation. The 

panelists pointed to substantial ongoing compensation increases in some sectors for both 

low- and high-wage employees. However, current and potential employees have placed 

growing emphasis on workplace culture as reflected in an organization’s mission and favorable 

employment conditions and benefits, including flexible hours and work location; these job 

conditions are increasingly viewed as viable substitutes for higher wages. The panelists also 

noted that many employers have altered their recruiting strategies and standards in response 

to tight labor markets. Companies have expanded their recruiting to reach wider geographic 

areas and previously neglected groups. In the extreme, some employers have started providing 

transportation from outlying areas to urban cores, or vice versa, to bring workers to jobs. In the 

airline industry, widespread pilot retirements have led to expanded recruiting efforts. Because a 

college degree is not a strict requirement to become a pilot, this includes reaching out to high 

school students to make them aware of this career option.

The Q&A discussion expanded on some key issues. In response to a question about the need for 

retraining, panelists noted that colleges and universities are not sufficiently adaptable to prepare 
95

Part 2: Event Summaries | Federal Reserve Bank of San Francisco

students for jobs of the future, necessitating increased direct training by employers. Regarding 

the apparent diminished relationship between tight labor markets and wage and price increases, 

the panelists agreed that industry competition forces them to look for alternatives, such as greater 

production efficiencies, rather than simply raising wages and prices.

Closing Keynote

Professor Atif Mian of Princeton University focused on the growth in debt-financed consumption 

spending over the past few decades in his final keynote address. He linked this pattern to rising 

income inequality. Specifically, he argued that growth in top incomes leads to increases in savings 

that are used to finance consumption growth for lower-income groups that otherwise have seen 

limited gains in purchasing power. Because the current expansion has relied largely on growth 

in consumer spending in recent years, this raises the possibility that the hot economy rests on a 

fragile foundation. Mian emphasized the importance of emerging from the current low interest 

rate environment to foster sustainable growth, although he noted that monetary policy is not a 

primary contributor to these developments.

Appendix: Results from Pre-Event Questionnaire

In the months leading up to the Fed Listens town hall, the San Francisco Fed distributed a preevent questionnaire to all invitees and received 108 responses. We provide here a summary of 

takeaways from the response comments, followed by tabulations of numerical responses to scaled 

questions.

Respondents weighed the Fed’s two statutory goals about evenly, though a slightly higher share 

viewed price stability as “very important” compared with maximum employment (79 percent 

versus 72 percent). Several respondents stressed what they saw as a crucial link between the two 

goals: Maximum employment can boost incomes and spending, growing the economy, but price 

pressures should be contained to preserve stability. Most respondents indicated that the Fed 

has achieved those goals well over the past few years, observing that unemployment has fallen 

noticeably without a significant run-up in inflation. However, specific comments noted that “the 

benefits of a ‘strong’ economy are not [being] equitably distributed,” even though “top-line 

figures for employment and inflation rates look very successful.” A few respondents pointed to 

below-target inflation as a cause for concern.

Respondents viewed the labor market in 2019 as considerably stronger than in normal times, but 

many noted that wages have not risen as rapidly as in past periods of very low unemployment. In 

general, respondents cited the following advantages of running a tight labor market: improved 

wage growth, the inclusion of marginalized groups, added investment in worker training to reduce 

turnover, and broader economic growth that accompanies hot labor markets. For disadvantages, 

participants noted the threat of unsustainable inflation, disproportionate increases in housing 

costs, high worker turnover, and constraints on business expansion arising from worker shortages.

In the current tight labor market, participants reported a mixed picture of whether wage increases 

are keeping pace with increases in the local cost of living. By a slim margin, most said wages have 

been growing faster than the cost of living, while many saw equal growth, and over one-fourth 

of respondents said wage growth has not been keeping pace, due in large part to briskly rising 

housing costs. Almost half of participants judged that moderate-income households benefit more 
96

Fed Listens | Perspectives from the Public

than low-income households from periods of low unemployment because of differences in skills, 

mobility, and exposure to automation and offshoring.

Numerical Summary

The following are tabulations of numerical responses to scaled questions.

45

How important are the Fed’s two statutory goals—maximum employment and price 

stability?

Not important Somewhat important Very important

Maximum employment 2% (2) 26% (25) 72% (71)

Price Stability 1% (1) 20% (19) 79% (76)

Over the past few years, how well do you think the Fed has done at achieving each of its 

two statutory goals?

Not successful Modestly successful Very successful Fully successful

Maximum employment 3% (3) 14% (13) 39% (35) 43% (39)

Price stability 6% (5) 26% (23) 41% (36) 26% (23)

How strong has your local labor market been in 2019, compared with typical conditions and 

also with past periods of very low unemployment rates (“peaks,” such as 2006–07, 1999–

2000, etc.)? Please consider job availability, wages and hours offered, other job benefits, etc.

Much weaker Somewhat weaker About the same Somewhat stronger Much stronger

Compared with 

typical conditions 3% (2) 4% (3) 8% (6) 29% (23) 58% (46)

Compared with 

past peaks 4% (3) 6% (5) 11% (9) 43% (34) 36% (29)

Relative to increases in the local cost of living, recent wage increases have been:

Much smaller Somewhat smaller About the same Somewhat larger Much larger

5% (4) 22% (18) 36% (30) 35% (29) 2% (2)

In your view, do low- or moderate-income households benefit more from low 

unemployment?

Low income benefit 

much more

Low income benefit 

somewhat more

Same Moderate income 

benefit somewhat more

Moderate income 

benefit much more

9% (7) 21% (17) 25% (20) 29% (23) 16% (13)

45 Share of responses for each choice is reported, with number of respondents for each choice in parentheses. Shares may not sum to 

100 because of rounding.
97

Part 2: Event Summaries | Board of Governors of the Federal Reserve System

Board of Governors of the 

Federal Reserve System

Chair Powell provided opening remarks and the motivation for the Fed Listens event on 

October 4, “Perspectives on Maximum Employment and Price Stability,” at the Board of 

Governors in Washington, D.C. He explained that the Federal Reserve System is hosting 

Fed Listens events around the country to improve its listening to and communication with 

representatives from diverse communities across the country.

The two panels focused on the Federal Reserve’s 

statutory, or dual, mandate: The first panel was devoted 

to discussing maximum employment, and the second 

panel focused on price stability. Federal Reserve 

policymakers asked questions about the labor market, 

inflation, the effects of the Fed’s monetary policy on 

different communities and groups across the country, and 

the Fed’s communications about monetary policy.

Panel 1: Maximum Employment

The first panel, moderated by Governor Brainard, featured speakers from two nonprofit 

organizations (Denise Scott, Local Initiatives Support Corporation, and Melinda Mack, New York 

Association of Training and Work Professionals), an industry consortium (Chad Moutray, National 

Association of Manufacturers), a start-up focused on freelance and gig economy workers (Sara 

Horowitz, Trupo), and an educational institution (Gregory Haile, Broward College). Several of the 

organizations work on increasing employment in low-income communities, sometimes partnering 

with businesses that provide jobs and training. Some organizations also work on education, 

housing, and health-care issues.

Current Labor Market Conditions

When asked whether the labor market feels as if it 

is at “full employment,” the majority of panelists 

answered “no.” Many cited pockets of persistently high 

unemployment—for instance, although the national 

unemployment rate is below 4 percent, some Zip codes 

and neighborhoods in large metropolitan areas have 

unemployment rates above 10 percent. Nevertheless, 

panelists agreed that a strong national labor market can 

help underserved populations find jobs and become 

attached to the labor force.

Panelists discussed structural barriers to employment faced by certain types of individuals and 

communities. Suitable housing was mentioned as a common barrier to stable employment; it is 

difficult for individuals to be focused and available for work when their homes are uninhabitable or 

they need to move frequently. Distance and transportation were mentioned as additional barriers 

that prevent people from connecting with job opportunities even in strong labor markets.
98

Fed Listens | Perspectives from the Public

On the industry side, the manufacturing association representative indicated that employers 

perceive the labor market as tight; some companies have tried to delay the retirement of 

experienced employees because they find it difficult to hire qualified workers. At the same 

time, community organizations and colleges are offering degree and training programs to help 

individuals qualify for gainful employment.

Skills, Wages, and the Cost of Living

Panelists discussed some reasons for mismatch between the needs of employers and the skills 

of workers. Some participants mentioned that, even in tight labor markets, many job postings 

have education requirements that screen out suitable candidates. One panelist noted that, 

paradoxically, employers invest less in training during expansions because skilled workers are 

more likely to be poached when the labor market is tight. In expansions, workers might also 

prefer to earn money in low-skilled jobs rather than spend time seeking additional qualifications 

that would make them more likely to get a position with higher pay. However, in downturns, 

when many workers have a renewed interest in training and degree programs, there is less 

funding from employers and government sources. In addition, the college president noted that 

logistical barriers and a lack of information from official and unofficial sources can prevent capable 

individuals from upgrading their skills to qualify for better-paid jobs.

When asked about the relationship between wages 

and living expenses, panelists generally agreed that 

many jobs do not pay a living wage. Some pointed 

to survey evidence that a large fraction of employed 

individuals cannot meet their monthly expenses. One 

panelist mentioned the hollowing out of the middle 

class, possibly related to the decline of unions and 

collective action. Another mentioned that wages in many 

caregiving occupations, which are a growing proportion 

of employment, are set by Medicaid reimbursement rates and not by the market. The speaker 

representing self-employed workers highlighted the importance of safety net programs for 

independent workers who have less access to government and employer-provided benefits.

Panelists generally focused on the costs of housing, health care, and childcare in their discussions 

of living expenses. Panelists mentioned that affordability is not the only challenge; in addition, it is 

important that these services are stable, easy to obtain, and of acceptable quality. They noted that 

these key services support workers’ abilities to remain employed and attached to the labor force.

The Federal Reserve’s Relationship with the Public

Panelists were asked to suggest ways that the Fed could improve its communication with the 

public. One panelist suggested that the Fed enlist local ambassadors—individuals who are 

trusted and have large networks within their communities—who can help the Fed connect with 

and transmit information to populations it does not typically reach. Another proposed that the 

Fed partner with trusted organizations. Several panelists agreed the Fed uses too much jargon, 

with one noting that even terms like “maximum employment” and “price stability” sound very 

academic and abstract to most people. Some panelists suggested that outreach efforts, such as 

the Federal Reserve Bank of New York’s comic book for school kids, and more general economics 
99

Part 2: Event Summaries | Board of Governors of the Federal Reserve System

and personal finance education could help bridge the gap between the Fed and the public. On a 

more positive note, some of these community and industry leaders mentioned that they make use 

of Federal Reserve System tools, such as those on “opportunity occupations.”

Panel 2: Price Stability

The second Fed Listens panel, moderated by Governor Bowman, featured speakers from a 

nonprofit organization (Nancy LeaMond, AARP, formerly the American Association of Retired 

Persons) and from two industry groups (Lisa Mensah, Opportunity Finance Network, and Holly 

Wade, National Federation of Independent Business). The institutions represented work with 

elderly Americans, small businesses, and financial institutions focused on serving communities that 

are typically underserved by mainstream banks. The panelists were asked how inflation affects the 

communities and institutions they represent. All of the panelists emphasized the importance of 

low, stable, and predictable inflation.

Vulnerability with Respect to Inflation

Some of the panelists emphasized that individuals in low-wealth and low-income communities 

who are already having a difficult time making ends meet are particularly vulnerable to increases in 

prices. Even small increases in inflation can be a challenge, and when people in these communities 

cut back on nonessential services because necessities become more expensive, the small 

businesses that cater to them also suffer. One panelist noted that about half of Americans over the 

age of 65 live exclusively or primarily on income from Social Security, which makes price stability 

especially important for their financial well-being.

The panelists widely agreed that the rising cost of health care is a major challenge to the people 

and groups they represent. This concern is particularly true for the elderly, whose financial wellbeing is closely tied to the cost of medical care and prescription drugs. In response to a question 

on how inflation affects employers’ ability to hire or retain workers, one panelist pointed out that 

offering health insurance to employees is a significant cost to businesses. Continued increases 

in the cost of health care present a big challenge and make it more difficult for people to absorb 

other cost increases, especially if rising inflation means that those other costs increase more 

rapidly than in the past.

Small Businesses and Nontraditional Financial Institutions

The particular ways in which inflation can cause difficulties for small businesses were also discussed 

by several panelists. Small businesses cannot always pass cost increases on to their customers in 

the form of higher prices. Higher costs are thus a hit to small business earnings, which are often 

the main source of financing for expanding the businesses as well as for funding their retirement.

Uncertainty over future inflation is particularly problematic, as businesses already have to navigate 

several uncertainties. A representative of a manufacturing industry association emphasized that 

manufacturing businesses, in particular, find it important to have certainty about pricing over long 

time horizons. Both recent developments in trade policy and the uncertainty surrounding tariffs 

were cited as examples of the uncertainties that businesses face over prices.

Regarding the problems created by rising inflation, the panelists mentioned that while inflation 

and rising costs were a major concern for many businesses at certain points in the past—especially 

when energy prices rose dramatically 30 to 40 years ago and again in 2008—those concerns are 
100

Fed Listens | Perspectives from the Public

currently not among the biggest difficulties that they face. Indeed, businesses have benefited from 

the current environment of low and stable inflation. However, the panelists emphasized that rising 

and uncertain inflation would be difficult for businesses to deal with, especially if inflation were to 

increase suddenly.

A representative from a group of CDFIs noted that such institutions and the people and 

businesses they lend to are particularly sensitive to increases in inflation. As these financial 

institutions offer credit and financing at accessible rates in lower-income communities, they 

operate on thin margins. Higher inflation, which puts additional pressure on margins, thus makes 

it more difficult to offer reasonably priced loans. Because CDFIs are often the only institutions 

that lend in certain underserved communities, these challenges can affect access to credit for 

affordable housing or small business loans for many people.

Communicating about the Fed’s Inflation Objective

The panel session included a discussion of the Fed’s communications with the public. The 

panelists pointed to the importance of the Fed Listens events and to the Federal Reserve’s 

convening power more generally, in terms of engaging with the public. With regard to the 

current environment of low inflation and low interest rates and the Fed’s review of its monetary 

policy strategy, tools, and communication practices, panelists were asked how the Fed could 

best communicate its desire and possible efforts to see inflation rise to achieve the Committee’s 

objective of 2 percent. Inflation has been below the FOMC’s 2 percent objective since 2012, and 

the panel was asked whether trying to bring inflation up would make sense to the public and how 

the Fed could best communicate about it. The panelists noted that work must be done to explain 

why inflation should be higher, especially to communities that often do not see their wages keep 

up with prices. Even though, for the Fed, it seems natural that faster wage growth would result 

from higher inflation in the longer run, one panelist pointed out that the long run can feel distant 

for many in underprivileged communities who struggle before wages catch up. Another panelist 

emphasized that the Fed should make clear to the public what the benefits of slightly higher 

inflation would be.
101

Part 2: Event Summaries | Federal Reserve Bank of Kansas City

Federal Reserve Bank of Kansas City

As part of the Federal Reserve System’s Fed Listens

program, the Federal Reserve Bank of Kansas City 

and Federal Reserve Chair Jerome H. Powell hosted 

a roundtable session with a group of local business 

and community leaders on October 9. This dialogue 

was part of the Fed’s review of its strategy, tools, and 

communication practices related to its congressionally 

mandated policy objectives of price stability and 

maximum employment. Chair Powell and Kansas City 

Fed President Esther George listened to Missouri and 

Kansas leaders discuss a range of economic issues, 

such as labor market conditions, local banking, and 

community development challenges.46

The following is a summary of some of the key points 

raised during the Kansas City Fed’s Fed Listens

discussion:

Labor Market

U.S. employment growth has generally remained solid in 2019 at a time when the unemployment 

rate remains very low. Discussion participants were asked to characterize labor market conditions 

based on recent developments in their industry or area. Most respondents said that the top 

challenge they face is attracting and retaining quality workers. One participant noted that in 

the construction industry, the pipeline for talent has been limited because many people left the 

industry after the Great Recession and have not returned. Combined with this, an aging workforce 

nearing retirement has created multiple challenges to provide workers for the construction 

jobs that are currently available. Another participant shared that in the food service industry, a 

tight labor market and less participation among youth have made it difficult to keep staffing at 

adequate levels. Many firms are turning to technology and automation to replace the jobs they 

cannot keep fully staffed.

Workforce development organizations that are working to help people move back into the 

labor force face a threefold problem. The first problem is accessibility: the place where training, 

childcare, and work occurs. The second problem is affordability: the ability of people to afford 

training, childcare, and travel to and from work. And the third problem is availability: the time at 

which training, work schedules, and childcare are available. In a 24-hour economy, these three 

factors represent the primary barriers that limit many people from joining the labor force. To 

improve the skills and training of potential workers that are now demanded by employers, one 

participant advocated for an expansion of the school system from the current kindergartenthrough-12th-grade model to a kindergarten-through-14th-grade system that would incorporate 

46 A webcast of the session is available on YouTube at https://youtu.be/oJ68LF6Fhnk.
102

Fed Listens | Perspectives from the Public

additional credentialing and certification programs that prepare individuals for skilled 

employment.

Wage Inflation

Discussion participants were asked to characterize the current pace of wage increases for workers 

in their industry or area. Several participants noted that current conditions, with limited available 

workers for most positions, have been pushing wages higher. But small business are particularly 

affected by tight labor markets because they cannot afford to keep pace with the wage increases 

of larger firms. These smaller firms also have more challenges than larger firms in getting access 

to credit, so even when they have opportunities to expand their businesses, they have limited 

options in attracting talent and obtaining the financing needed to expand operations.

Inflation

Participants were asked to discuss the major cost and pricing pressures that firms in their industry 

and area are facing. A participant noted that in the construction industry, most of the upward cost 

pressure is coming from higher labor costs, which are primarily being driven by increases in healthcare costs. Additional cost pressures include materials costs for construction, such as higher steel 

prices. Another participant similarly noted that in the information technology industry, labor costs 

are the biggest pressure, though compliance costs associated with the numerous regulations that 

firms need to comply with are a secondary cost.

Current Economic Conditions

Participants were next asked to comment more broadly on economic conditions, including 

comparing today’s situation with conditions from 5 to 10 years ago. A participant from the 

agriculture industry shared that this industry is struggling for three main reasons. First, a glut of 

agricultural commodities is putting downward pressure on prices. Second, the current trade policy 

disputes and trade disruption have created additional downward pressure on prices through a 

decline in demand for U.S. agricultural commodities. And, third, the elevated value of the U.S.

dollar has decreased the competitiveness of U.S. agriculture in the global market. These forces 

have combined to lower annual revenues for the agriculture industry by 50 percent relative to 6 to 

8 years ago.

In discussing the Kansas City metro area, another participant noted that while Kansas City 

experienced moderate growth during most of the current expansion, growth has slowed in recent 

years. In particular, a concerning factor is that Kansas City is falling behind the pace of growth of 

its peers. One of the factors that may be limiting the current pace of growth is the industry mix 

for Kansas City, as it is perhaps not quite as diverse relative to its peers. A limited industry mix 

may be constraining current growth because of current weaker conditions in the agriculture and 

manufacturing industries. Another limiting factor may be the workforce, where 9 out of 10 new 

workers in Kansas City are minorities. These workers typically have less education and skill training 

than white households and therefore have a more challenging time in terms of competing for jobs.

The positive news is that a number of innovative partnerships between public groups and private 

employers are being created to promote broader prosperity for the citizens of the Kansas City 

metro area.
103

Part 2: Event Summaries | Federal Reserve Bank of Kansas City

A participant in the civil and structural engineering industry noted that economic conditions are 

very strong, but a notable shortage of workers is limiting the pace of business expansion. A high 

level of competition for engineers in the Kansas City metro area is driving wages higher. Many 

firms are focusing on developing their own talent via additional investment in the training of 

younger engineers.

Sustainable Economic Growth

For the final topic, participants were asked to discuss constraints currently facing businesses, 

households, and communities with regard to cultivating economic opportunity and the path 

toward improved economic outcomes. One participant in the nonprofit sector noted that 

nonprofits face the same issues as for-profits, including rising business costs, wage inflation, and 

challenges in training workers. Through a strong commitment to workforce development and 

creation of a charter school, this participant’s organization is preparing a broad group of students 

from low- to moderate-income communities for college and employment in skilled jobs. The 

organization also runs a low-income credit union to contribute to a local economy where many of 

its customers are underbanked.

Another participant emphasized the importance of efforts by CDFIs to deploy capital in lowincome communities. These efforts can help address economic and income disparities by assisting 

communities that have not been able to accumulate much wealth. One recent effort has focused 

on providing microloans to small businesses in these communities.

Several participants noted that the public education system would benefit from increased support 

and funding so that it can help the next generation of workers enter the labor force with the skills 

employers are seeking. In recent years, the pace of funding for education has not keep pace with 

growth in the private sector.
104

Fed Listens | Perspectives from the Public

Federal Reserve Bank of Chicago

On October 17, the Federal Reserve Bank of Chicago 

hosted a Fed Listens event to better understand 

the perspectives of workers and their communities, 

especially those facing disadvantages, on the effects 

of monetary policy. Practitioners, advocates, and 

policymakers participated in two panel discussions 

focused on the Federal Reserve’s long-run monetary 

policy goals established by the Congress, the tradeoffs 

associated with different approaches to monetary policy, and how these approaches affect 

disadvantaged workers and their communities.

Chicago Fed President Charles Evans and Fed Governor Michelle Bowman opened the session 

by emphasizing that workers and community representatives can provide important insights 

to help guide the Fed’s work. The first panel discussed disadvantaged workers’ experiences in 

the labor market. Panelists shared their experiences in workforce development, human capital 

development for workers with a criminal record, 

community college education, and labor organizing.

The second panel explored wealth-building in 

LMI communities from the perspective of financial 

counseling, neighborhood revitalization and small 

business development, CDFIs, and federal housing 

finance policy. David Wessel, director of the Hutchins 

Center on Fiscal and Monetary Policy at the Brookings 

Institution, moderated both panels.

Setting the stage for the panel discussions, Chicago Fed Executive Vice President Daniel Sullivan 

posed key questions of interest to Federal Reserve policymakers:

• Is unemployment below its natural rate, and should we worry about unemployment being 

too low?

• Which policy tools can help disadvantaged workers to be more productive and earn higher 

wages in the long run?

• Does the Federal Reserve need new monetary policy strategies?

• What kinds of macroeconomic conditions would best support efforts to build wealth in LMI 

communities?

The panel discussions provided important and diverse insights into how monetary policy affects 

disadvantaged workers’ long-term employment prospects and their ability to build wealth. The 

panelists’ observations are summarized as follows.
105

Part 2: Event Summaries | Federal Reserve Bank of Chicago

1. The national unemployment rate may not be able to fully capture whether the economy 

is at full employment.

Panelists pointed to many reasons why the national unemployment rate is not sufficient 

for understanding whether the economy is at full employment. For one, panelists pointed 

to how labor market conditions are typically worse for workers they seek to help through 

their organizations, including dislocated workers, young workers, those with an arrest or a 

conviction, adults with spotty employment histories, and workers without a college degree.

One panelist representing a workforce development agency questioned whether the term 

“full employment” characterized the state of the labor market for all workers, stating that in 

some neighborhoods, “it’s always a recession”—for example, in Chicago neighborhoods with 

persistently high unemployment, between 15 and 17 percent. Panelists stressed that while 

such levels would be considered catastrophic for the country as a whole, they are among 

the lowest these communities have known. Several panelists said they did not believe the 

economy is at full employment because of the disproportionately high unemployment rates 

for African American men and those with disabilities and emphasized that these groups 

of unemployed workers represent an underutilized “talent pool.” A panelist who works 

with formerly incarcerated workers reentering the workforce also asked whether one could 

confidently speak of full employment conditions without completely understanding who 

was being left out of the unemployment data. A panelist representing a labor union noted 

that workers in some industries may be more willing to go on strike in a strong labor market.

This may highlight how today’s low unemployment rate does not ensure good employment 

conditions for all workers.

2. Disadvantaged workers and their communities experience worse outcomes during 

recessions and recover more slowly.

One panelist noted that the formerly incarcerated are hit particularly hard by a recession, 

as they tend to be among the last hired and the first fired. Panelists emphasized the need 

for such workers to experience lengthy employment periods so that they can enhance 

their work histories, support their families, and build wealth. A panelist working in Chicago 

neighborhoods noted that the business cycle also hits minority communities harder than 

others.

To illustrate this point, a panelist acknowledged that while economic conditions in Chicago’s 

LMI neighborhoods may be better than ever, conditions are still worse than those associated 

with a recession in most of the nation. Another panelist pointed out that some African 

American families remain reluctant to buy homes today, particularly in neighborhoods still 

recovering from the foreclosure crisis, which hit them especially hard. A panelist representing 

a labor union stated that in certain communities, it has taken a long time for wage gains to 

emerge; indeed, some private-sector employers still have not raised wages. Panelists also said 

that adverse outcomes from the recession endure for many low-income workers in terms of 

unfavorable work contracts or unstable employment arrangements.
106

Fed Listens | Perspectives from the Public

3. Labor market conditions have more direct effects on disadvantaged workers and their 

communities than does the inflation environment.

Panelists emphasized that the strong economy provided new opportunities for workers that 

typically have difficulty participating in the labor market or securing higher wages and better 

working conditions. One panelist representing workers with arrest and conviction records 

shared that employers have become less selective in today’s tight labor market and are 

beginning to look at those workers as untapped talent. In some instances, employers have 

changed hiring practices and policies to be able to hire workers with criminal records. A few 

panelists noted that some, but not all, workers were finding it easier to secure higher wages, 

and one panelist noted industry-wide differences in the ability to obtain higher wages. A 

panelist representing a community college pointed out that employers experiencing difficulty 

finding skilled workers have become more interested in working with community colleges to 

develop training programs. The same panelist also noted that enrollment levels were lower 

during periods of economic expansion, as young adults chose working over enhancing their 

skills through education.

On the subject of price stability, panelists had few direct examples of the effects of inflation 

on workers and their communities. Some panelists felt the concept of inflation was abstract 

for people dealing with the day-to-day challenges of making rent or paying for childcare.

Opinions varied across panelists on how sensitive LMI communities are to changes in interest 

rates. One panelist specializing in housing finance spoke about the challenge house price 

inflation was creating for those seeking to purchase their first home but acknowledged the 

unclear relationship between rising house prices and the general inflation rate targeted by the 

Federal Reserve. Several panelists shared their perspectives on factors that may be leading to 

higher prices in the housing market, such as construction and regulatory costs. They generally 

agreed that addressing these concerns is essential to increasing the supply of affordable 

housing and enable first-time buyers to enter the market.

4. Stable unemployment and inflation are better for disadvantaged workers and their 

communities than periods of major ups and downs in the economy.

Panelists representing organizations that serve disadvantaged workers generally expressed 

concern about employment volatility and agreed that stable labor market conditions 

benefit these workers. Another panelist noted that workers with criminal records who are 

only beginning to enter the labor force need additional time to strengthen their labor force 

attachment and build out their work history. The panelists also expressed concern that a 

recession could reverse the gains that have accrued to workers with criminal records during 

the expansion.

Panelists also agreed that stable conditions were more conducive to fostering wealth 

accumulation in LMI communities. Several panelists shared their perspectives on economic 

stability and how CDFIs are able to pass on lower interest rates to borrowers during periods 

of sustained low rates. One panelist representing a CDFI explained that economic and 

community development takes time, and CDFIs are better able to get their clients to a point 

where they might be able to get bank accounts or mortgages when economic conditions 

are stable. They also emphasized that people need sufficient time during good economic 
107

Part 2: Event Summaries | Federal Reserve Bank of Chicago

conditions to gather information about how to start businesses and secure financing. Similarly, 

a panelist pointed out that economic development takes a long time to have an effect, 

underscoring the risk of economic volatility undermining real estate development projects in 

LMI neighborhoods.

5. In the credit market, monetary policy is but one of several factors influencing borrowing 

and lending.

One panelist noted the many reasons why low interest rates do not reach creditworthy 

households, including risk-based pricing and the difficulty of documenting income among 

self-employed workers. Also, others noted that mortgage borrowing may be low today 

because there is a thin inventory of homes for sale at prices that LMI households can afford.

Panelists described how the credit experiences of their constituents are also affected by 

economic cycles, with credit standards (including down-payment or mortgage insurance 

requirements) being looser during an expansion and tighter during a contraction. Panelists 

agreed that LMI households’ access to credit was adversely affected during recessions.

However, panelists working with CDFIs emphasized the stabilizing role of CDFIs in providing 

credit to LMI communities during recessions when the availability of credit dries up. While 

CDFIs tend to be small in scale, they often become an important lender in markets when 

banks pull back. As mission-driven lenders, CDFIs also transmit low interest rates directly to 

their customers, panelists said.

6. The link between the Federal Reserve’s monetary policy tools and income inequality is 

indirect and complex.

Panelists generally recognized the limits of the Fed’s monetary policy tools for mitigating 

income inequality. However, many noted that extended periods of economic stability 

enable program and service providers to develop and deliver interventions that benefit 

disadvantaged workers and their communities. For example, a panelist representing a 

community college spoke about how the institution is training students and adapting curricula 

so that their graduates can better match the skills employers say they need. Another reflected 

that periods of economic stability enable those not in the labor force—for example, the 

formerly incarcerated—to gain access to and seek job opportunities and, in due course, to 

develop human capital and build savings.

Panelists’ insights into how income inequality affects disadvantaged workers highlighted 

indirect connections with monetary policy. For example, one panelist noted the importance of 

reliable transportation infrastructure for accessing economic opportunities, recognizing that 

such funding depends, in part, on financial market stability and the availability of taxpayer 

resources. Another panelist noted that a lack of access to high-quality and affordable childcare 

leads to challenges in securing employment, a target of the Fed’s monetary policymaking.

They also noted that, in some cases, even zero interest rates would not be enough to enable 

their constituents to buy a house, for example, due to the challenge of documenting income 

(in the case of someone working in the informal or “gig” economy) or the burden of student 

loans.
108

Fed Listens | Perspectives from the Public

7. The Federal Reserve’s economic research and its ability to bring experts and 

policymakers together can have important roles in our nation’s policy deliberations on 

many important economic issues.

Panelists noted that they had found research by Federal Reserve economists useful for 

understanding topics such as labor market discrimination. The moderator observed that the 

research done by Federal Reserve economists is providing important insights into when and 

how policy interventions may be effective at inducing sustainable wage growth, strengthening 

household economic resilience during recessions, reducing labor market discrimination, and 

related issues. An audience member suggested that the Federal Reserve’s research could help 

“depoliticize” the issues related to income inequality. One panelist recognized the important 

role of the Fed as a convener in bringing together actors who can collaborate on policy 

solutions.
109

Part 2: Event Summaries | Update, Board of Governors of the Federal Reserve System

Update, Board of Governors of the 

Federal Reserve System

The Federal Reserve Board convened an event, “Fed Listens Update: How Is COVID-19 Affecting 

Your Community?” on May 21, 2020, to hear from a number of the panelists who participated in 

Fed Listens events in 2019 about the effects of the rapidly changing public health and economic 

environments.

47 Following opening remarks from Chair Powell, Governor Brainard provided each 

panelist with a comment he or she made in 2019 and asked them to discuss the changes their 

communities were facing since the onset of the coronavirus (COVID-19) in the United States.

Amanda Cage (president and CEO, National 

Fund for Workforce Solutions) had spoken in 

2019—at a time when the national unemployment 

rate was below 4 percent—about low-income 

neighborhoods in Chicago facing doubledigit unemployment rates.

48 These low-income 

neighborhoods had been hit very hard by the 

coronavirus, with rates of infection far higher than 

in other parts of the city. In addition, jobs had 

disappeared—in hospitality, childcare, private security, and other areas. For those still working—in 

delivery, in warehousing, or at grocery stores—the work was more difficult than ever, entailing 

greater demands in riskier working conditions. Cage observed that in 2019, her concern had been 

about sharing prosperity, whereas the current challenges are how to provide distance training to 

those who do not have internet connections and how to bring together the newly unemployed 

with the companies that are still hiring.

Patrick Dujakovich (president, Greater Kansas City AFL-CIO) reported in 2019 that one of the great 

things about the good jobs market was that it was providing the most vulnerable people with 

a foothold in the workforce.

49 At the same time, he had warned about the risk those vulnerable 

new employees would face in an economic downturn. When asked how those most vulnerable 

workers were faring now, Dujakovich responded that his greatest concern was that people without 

education or skills would lose hope, especially if the downturn proved to be long lived. For now, 

families are benefiting from stimulus checks and increases in unemployment benefits. But those 

benefits will end soon, and it will be difficult for many families to meet their financial commitments 

if the downturn continues and the benefits are not renewed. At the same time, being out of the 

workforce will lead to career damage for many workers. Dujakovich emphasized that people want 

to work, but they also need to be able to work safely.

47 The event was livestreamed; the transcript and video are available on the Board’s website at https://www.federalreserve.gov/

conferences/fed-listens-how-is-covid-19-affecting-your-community.htm.

48 Amanda Cage was a panelist in the Federal Reserve Bank of Chicago’s Fed Listens event in October 2019. A summary of that event 

is provided earlier in this part of the report. A video of the event can be found on the Bank’s website at https://www.chicagofed.org/

conference.

49 Patrick Dujakovich was a panelist at the System research conference in June 2019. A summary of that event is provided earlier in 

this part of the report. A video of the event is available on the Bank’s website at https://www.chicagofed.org/events/2019/fed-listensconference-on-monetary-policy.
110

Fed Listens | Perspectives from the Public

When asked if many people in their communities had returned to work, Dujakovich noted 

that those who have jobs may not be able to work safely—workers in meat-packing plants, for 

example. Cage commented that even if some sectors of the economy reopen, others face lasting 

changes. In the hospitality sector, many of the jobs are filled by low-skilled workers, and a longerterm loss of those jobs would deny opportunities for many. Health care had provided steady 

employment in the past, but with this crisis, there are layoffs.

Juan Salgado (chancellor, City Colleges of Chicago) noted in 2019 that students at the City 

Colleges of Chicago, who are largely African American and Latinx, were benefiting from 

apprenticeship programs with local businesses and from having pathways to entry-level jobs 

that might historically have gone to students with four-year degrees.

50 These apprenticeship 

programs had been created in response to difficulties locating employees in the tight labor 

market. Although the collapse in the economy from the public health crisis has been devastating 

to his students, the situation for the apprenticeship program has been better, as employers have 

not pulled back—indeed, some have stepped up the number of apprenticeships—and have 

generally been very supportive of their apprentices. In Latinx and African American communities, it 

is rare for workers to be able to work from home, so the stability that the apprenticeship program 

provides is especially valuable.

When asked about the experience with remote learning and plans for the fall semester, Salgado 

replied that the transition to remote learning had been successful, in part because City Colleges 

of Chicago already had the technology in place. As to the fall, he was hopeful that remote 

learning could be offered as an option. Remote learning is not possible for everyone, however, as 

individual family circumstances can make it difficult for some students.

Darrin Williams (CEO, Southern Bancorp, Inc.) runs a CDFI as well as a community bank. When 

asked how the communities in the Arkansas and Mississippi Delta were weathering the COVID-19 

crisis, he responded that Southern Bancorp had reached out aggressively to small business 

customers and encouraged them to apply for Paycheck Protection Program (PPP) loans. To date, 

his bank had processed more than 1,200 PPP loans totaling more than $110 million, was cashing 

stimulus checks without a fee for those without a bank account, was deferring loan payments for 

consumer and commercial banking customers, and was providing assistance to customers who 

were unfamiliar with accessing banking services remotely. Asked about the differences between 

the more- and less-advantaged locales his organization serves, Williams spoke of creative efforts 

by the nonprofit branch of his organization to provide grants to very small cash-based businesses 

that rely on informal accounting systems and are not eligible for PPP loans.

Bobby Ukrop (president and CEO, Ukrop’s Homestyle Foods) provided an update on conditions at 

his Richmond-area food preparation company, which has suffered a sales loss of 25 percent since 

the onset of COVID-19.

51 Although grocery store sales are generally higher, Ukrop’s provides many 

self-serve items that have been affected by health concerns (salad and hot-food bars) or by stay-athome orders (packaged lunches for office workers and cakes for party celebrations). His sales have 

50 Juan Salgado was a panelist at the System research conference in June 2019. A summary of that event is provided earlier in this 

part of the report. A video of the event can be found on the Bank’s website at https://www.chicagofed.org/events/2019/fed-listensconference-on-monetary-policy.

51 Bobby Ukrop was a panelist in the Federal Reserve Bank of Richmond’s Fed Listens event in May 2019. A summary of that event is 

provided earlier in this part of the report.
111

Part 2: Event Summaries | Update, Board of Governors of the Federal Reserve System

also been hurt by shifts at grocery stores toward high-priority items, such as cleaning supplies, and 

his business is coping with increased health and safety concerns. On pricing, Ukrop indicated that 

his firm had successfully raised prices and wages last year but may not be able to afford another 

wage increase this year. The firm received a PPP loan, which his company’s community bank 

processed very promptly.

Another small business owner, Joanne Chang (Flour Bakery) noted that her eight cafés had closed 

for five weeks while the Boston area was a COVID-19 hotspot.

52 That shutdown furloughed 490 

of the firm’s 500 employees. Since then, half the cafés have reopened, with limited operating 

hours for pickup and takeout. Overall, sales are down 75 to 80 percent. The employees who 

have returned to work are managers, who are likely to adapt most readily to the new working 

environment. Her company raised wages in order to compete with the hike in unemployment 

benefits and is running a shuttle service for employees who would typically commute by public 

transportation.

When asked when her cafés will be able to return to pre-crisis operations, Chang answered that 

having people physically enter the cafés and sit down is probably at least a month away. Even so, 

they will need to reorganize operations—to provide greater distancing among kitchen staff and to 

limit the number of customers in the cafés at any one time.

Janie Barrera (president and CEO, LiftFund) spoke to the effects of the pandemic on the small 

borrowers that her CDFI funds.

53 Most of LiftFund’s clients are in the service sector, which has been 

particularly hard hit by the crisis. As a first step, LiftFund deferred payments on business loans for 

four months and extended credit and grants to businesses with fewer than 10 employees. Many of 

the new loans were made under the PPP. Because many very small businesses are not accustomed 

to taking on debt, basic financial education is a key part of the process. Looking ahead, LiftFund 

sees helping businesses plan for their ultimate survival as a central part of its outreach.

When asked about the availability of PPP loans, Barrera indicated that for larger, more 

sophisticated businesses, applying for and obtaining a PPP loan were quite straightforward.

LiftFund has focused its attention on providing assistance to the many very small businesses that 

could benefit from a PPP loan.

Aaron Gornstein (president and CEO, Preservation of Affordable Housing) had emphasized 

the importance of employment for making housing affordable in his 2019 remarks.

54 Gornstein 

indicated that health and safety issues raised by the COVID-19 crisis were his organization’s first 

concern: checking up on residents and making sure they have access to food, health care, and 

government support. He pointed out that job loss has been particularly heavy for low-income 

workers who need affordable housing. For those who continue to work, a chief concern has 

been school closings and the lack of childcare. Rent collections from his organization’s housing 

communities are down but somewhat less than had been expected, in part because of the support 

52 Joanne Chang was a panelist in the Federal Reserve Bank of Boston’s Fed Listens event in May 2019. A summary of that event is 

provided earlier in this part of the report.

53 Janie Barrera was a panelist at the System research conference in June 2019. A summary of that event is provided earlier in this 

part of the report. A video of the event can be found on the Bank’s website at https://www.chicagofed.org/events/2019/fed-listensconference-on-monetary-policy.

54 Aaron Gornstein was a panelist in the Federal Reserve Bank of Boston’s Fed Listens event in May 2019. A summary of that event is 

provided earlier in this part of the report.
112

Fed Listens | Perspectives from the Public

extended by the CARES Act. However, stresses on renters would likely rise once the current 

government support expires in the late summer. Gornstein noted that expanded tax credits in 

conjunction with the Community Reinvestment Act could play a role in supporting affordable 

housing during the crisis.

In 2019, Nancy LeaMond (executive vice president and chief advocacy and engagement officer, 

AARP) had focused on the economic anxiety of older Americans.

55 While older Americans were 

already nervous about the economy at that time—when conditions were strong—it is clear that 

they are even more nervous now. AARP does extensive outreach to its 38 million members, 

conducting frequent polls and fielding phone calls. AARP’s members are very concerned about 

the health aspects of the pandemic and about the risks associated with reopening the economy 

too early. In addition, AARP was hearing from older Americans who had not yet received stimulus 

checks and who were having difficulty filing for unemployment benefits. LeaMond pointed out 

that it generally takes longer for older Americans to find jobs when they are laid off. Overall, older 

Americans are much more concerned about their financial condition than before the pandemic.

That concern is clear not only for those fortunate enough to have a 401(k) account, who have seen 

the value of their stock market investments fall, but also for those who had been relying on jobs in 

the “gig” economy—driving a ride-share or operating a home-share to supplement their incomes.

In a final question, Governor Brainard asked the panelists how they think the coronavirus will 

alter the landscape for work in the communities they serve. Panelists touched on a number of 

topics, including the importance of government initiatives, such as the New Deal, in stemming 

high unemployment; the concern that the COVID-19 crisis will exacerbate existing inequality, 

especially for those in the African American and Latinx communities; the loss of jobs associated 

with cancellation of concerts and other major public events; the transformation of education; and 

the long-term effects on consumer eating and dining patterns.

55 Nancy LeaMond was a panelist in the Federal Reserve Board’s Fed Listens event in October 2019. A summary of that event is 

provided earlier in this part of the report.
113

PART 3: FEDERAL RESERVE SYSTEM

RESEARCH CONFERENCE

The Federal Reserve’s research conference held on June 4–5 included seven research sessions 

and two Fed Listens panels; the Fed Listens panels are summarized in Part 2 of this report.56 This 

part provides brief summaries of the research presentations, the discussants’ remarks, and the 

audience comments.

Session 1: Review of the Federal Reserve’s Current Framework for Monetary Policy

In their paper “The Federal Reserve’s Current Framework for Monetary Policy: A Review and 

Assessment,” Janice Eberly, James Stock, and Jonathan Wright summarize the Federal Reserve’s 

current framework for monetary policy, review the efficacy and consequences of the policies 

undertaken during and in the aftermath of the financial crisis that began in 2007, and discuss how 

the U.S. economy would have evolved during the economic expansion that began in 2009 under 

alternative scenarios for monetary policy.57

After the FOMC reduced the policy interest rate 

to nearly zero in late 2008, policymakers turned to 

two other policy tools to provide stimulus to the 

economy: changes in the Federal Reserve’s balance 

sheet and communications about the expected 

future path of policy, known as “forward guidance.” 

The authors review studies in the research literature 

on the efficacy of balance sheet and forwardguidance policies. Regarding balance sheet policy, 

purchases of longer-term Treasury or agency securities affect interest rates by reducing risk 

premiums on longer-term bonds and by signaling that the Federal Reserve intends to keep policy 

rates low for a longer period than in the absence of the purchases. Existing studies indicate 

that the effects of the Federal Reserve’s asset purchases on output and inflation were positive, 

economically meaningful, and perhaps strongest in the early stages of the recovery. Some studies 

suggest that purchases of mortgage-backed securities increased mortgage refinancing activity, at 

least among households that were not underwater in making mortgage payments, and that asset 

purchases in general supported bank lending.

Research on forward guidance indicates that the Federal Reserve’s communications during the 

economic recovery helped shape expectations of households and businesses regarding the nearterm path of the federal funds rate. Eberly, Stock, and Wright note that the evidence is mixed 

56 The conference program with links to the papers, presentations, and videos is available on the Board’s website at https://www.

federalreserve.gov/conferences/conference-monetary-policy-strategy-tools-communications-20190605.htm.

57 See Janice C. Eberly, James H. Stock, and Jonathan H. Wright (2020), “The Federal Reserve’s Current Framework for Monetary Policy: 

A Review and Assessment,” International Journal of Central Banking, vol. 16 (February), pp. 5–71.
114

Fed Listens | Perspectives from the Public

regarding the effects of forward guidance on output and inflation, reflecting in part the possibility 

that monetary easing actions may convey negative information about the state of the economy.58

During the economic expansion that began in the second quarter of 2009, improvement in the 

labor market was steady and on pace with recent expansions despite historically slow output 

growth. Price and wage inflation were quiescent. Eberly, Stock, and Wright attribute much of the 

slow growth in output to factors that have little to do with monetary policy.59 Therefore, the authors 

conclude that the scope for alternative monetary policies to bring about large improvements in 

output growth would have been limited. The authors also conclude that the steady decline in the 

unemployment rate during the recovery suggests that monetary policy remained effective despite 

the fact that the policy interest rate was constrained near zero.

The authors estimate a simple macroeconomic model to study how alternative scenarios for 

monetary policy would have affected the economic expansion. In their analysis, Eberly, Stock, and 

Wright treat balance sheet and forward-guidance policies collectively as “slope” policies that 

affect the slope of the term structure of interest rates.

The authors reach six main conclusions. First, slope 

policies supported the labor market and inflation; 

absent these policies, the unemployment rate would 

have fallen much more slowly than it did.60 Second, more 

aggressive slope policies might have boosted the labor 

market and output growth, but output growth would 

nevertheless have remained below the pace observed in 

previous economic expansions because of the slowdown 

in productivity growth. Third, the FOMC cut the policy 

interest rate to nearly zero in late 2008, but because the rate could not move down further, interest 

rate policy was significantly constrained during the recovery; absent this constraint, the federal 

funds rate would have been about negative 5 percent. Fourth, small changes in the stance of 

monetary policy would have produced small changes in realized outcomes. Fifth, when the policy 

interest rate is constrained at or near zero, alternative policies with the largest effects involve early 

and aggressive slope policies. Finally, if the Federal Reserve had “inherited” an inflation target of 3 

percent rather than the 2 percent goal the FOMC specified in its Statement on Longer-Run Goals 

and Monetary Policy Strategy, the economic recovery would have been substantially more rapid.61

58 Nakamura and Steinsson (2018) find that a surprise monetary policy easing—measured using an event-study approach—leads to 

lower nominal and real interest rates as well as a decline in projected output growth. The response of output growth forecasts is the 

opposite of what one would conventionally expect from monetary policy easing, suggesting that surprise easing conveys negative 

information known to the Federal Reserve about the economic outlook. See Emi Nakamura and Jón Steinsson (2018), “High-Frequency 

Identification of Monetary Non-Neutrality: The Information Effect,” Quarterly Journal of Economics, vol. 133 (August), pp. 1283–1330.

59 The authors point to demographic factors (the retirement of the baby boomers), a slowdown in productivity growth reflecting 

structural trends in the U.S. economy, and headwinds from fiscal policy before 2018, all of which predate the financial crisis.

60 The authors find that the unemployment rate would have reached the CBO’s estimate of the long-run natural rate of unemployment 

more than one year later.

61 In this scenario, the unemployment rate reaches the CBO estimate of the long-run natural rate seven quarters earlier. The FOMC 

first articulated its 2 percent goal for inflation in the Statement on Longer-Run Goals and Monetary Policy Strategy, first issued in 

January 2012. The statement is available on the Board’s website at https://www.federalreserve.gov/monetarypolicy/files/FOMC_

LongerRunGoals.pdf.
115

Part 3: Federal Reserve System Research Conference

Eberly, Stock, and Wright note important caveats regarding their counterfactual scenarios, 

including that the scenarios were conducted with the benefit of hindsight; some of the scenarios 

were not feasible in real time; and the scenarios do not take account of concerns that might 

have limited a more aggressive stance of monetary policy.62 The authors emphasized that the 

counterfactual scenarios should not be interpreted as second-guessing the Federal Reserve, 

but rather as informing discussions about the efficacy of monetary policy in a low-inflation 

environment.

Discussion

Following the authors’ presentation, John Taylor offered remarks from the perspective of rulesbased monetary policy, which has been a hallmark of his academic work. Taylor questioned the 

authors’ assertion that the Federal Reserve’s current framework for monetary policy began in 

2012, pointing to deviations from rules-based monetary policy from 2003 to 2005 when the FOMC 

began employing forward guidance about the policy interest rate in its communications. He 

raised various technical issues about the empirical model that Eberly, Stock, and Wright used for 

the alternative scenarios; in particular, Taylor did not agree with treating the level of the policy 

interest rate and the slope policies as distinct or with the absence of a structural model that could 

be used to assess different policy rules. At a minimum, the authors should have subjected their 

findings to checks for robustness. In sum, Taylor argued that the evidence for the effectiveness of 

slope policies in supporting the economic recovery was weak, that the FOMC should not raise its 

inflation goal above 2 percent, and that the Federal Reserve and other central banks should aim 

for rule-like monetary policies.

Questions from the audience focused on a range of issues, including the role of productivity 

growth in economic expansions and its relationship to full employment; the role of other economic 

policies—for example, fiscal policy—in combating economic downturns; the effectiveness 

of policies the authors did not consider, such as targeting the yield curve or reducing policy 

interest rates below zero; and the role of Federal Reserve communications in enhancing policy 

effectiveness in the next economic downturn.63

Session 2: Maximum Employment

Katharine Abraham opened her presentation by 

referencing communications from Federal Reserve 

policymakers about the difficulties associated 

with assessing maximum employment, one of the 

statutory goals for monetary policy. Tightness in labor 

markets—that is, the position of the economy relative 

to full employment—is often assessed using the gap 

between the unemployment rate and an estimate of 

the natural rate of unemployment. Macroeconomic 

models commonly used by central banks rely on this gap.

62 For example, the scenarios do not account for uncertainty about the effects of slope policies or unintended adverse consequences of 

monetary policy easing (such as excessive risk-taking in financial markets).

63 A detailed review of the audience discussion is available on the Federal Reserve Bank of Chicago’s website at https://www.

chicagofed.org/~/media/others/events/2019/monetary-policy-conference/session-1-audience-qa-summary-pdf.pdf?la=en.
116

Fed Listens | Perspectives from the Public

The research literature on search and matching models uses an alternative measure of labor 

market slack—the ratio of vacancies to unemployment (V/U)—that assesses slack in the labor 

market based on flows into and out of employment.64 Abraham noted that, like the unemployment 

rate, V/U was pointing to very tight conditions in the labor market, although there was little sign of 

acceleration in wages or prices, as would be expected when labor market conditions are tight. She 

reviewed potential explanations for the disconnect between indicators of labor market tightness 

and inflation, with one explanation being the mismeasurement of tightness.

In their paper prepared for the conference, “How Tight Is the Labor Market?” Abraham 

and John Haltiwanger propose amendments to the standard V/U measure to create a more 

accurate and comprehensive indicator.65 In particular, the standard search measure includes only 

the unemployed and excludes searchers who are outside of the labor force as well as those 

who are already employed; the authors add in these groups. In addition, the authors weight 

particular types of job searchers by their search intensity because the intensity of search by the 

different groups may vary with labor market conditions. Finally, because the recruiting intensity 

of employers may vary with labor market conditions as well, Abraham and Haltiwanger weight 

aggregate vacancies by recruiting intensity.

Search intensity on the part of job seekers and recruiting 

intensity on the part of firms include both the time 

and resources devoted to search and recruiting as 

well as a worker’s efficiency at finding work and the 

stringency or looseness of a firm’s hiring standards.

The authors approximate search intensity by looking 

at a group’s average ability to find a job. For example, 

unemployed workers on temporary layoff find jobs 

significantly more quickly, on average, than those who 

have permanently severed ties with their previous employer. Furthermore, unemployed workers 

are, on average, more likely to find jobs than either employed workers or those out of the labor 

force. Thus, workers on temporary layoff get the highest weight—or highest estimated level of 

search intensity—in the expanded measure, and unemployed workers have a higher weight than 

employed workers or individuals out of the labor force. Because employed workers and individuals 

out of the labor force are an order of magnitude larger than the unemployed, those groups each 

account for more hires and more effective searchers, on average, than the unemployed even 

though they have a lower search intensity than the unemployed.

The sum of all job searchers weighted by their search intensities equals the effective number of 

job searchers, while the product of vacancies and recruiting intensity equals the effective number 

of vacancies. The Abraham–Haltiwanger generalized measure of labor market tightness (GLMT) 

64 Labor market tightness can be represented as the ratio of labor demand (job vacancies, or V) to labor supply (the number of workers 

searching for a job, which is often measured using unemployment, or U). A high (low) ratio of V to U indicates a low (high) level of labor 

market tightness.

65 See Katharine G. Abraham, John C. Haltiwanger, and Lea E. Rendell (2020), “How Tight Is the U.S. Labor Market?” paper presented 

at the Brookings Papers on Economic Activity Conference, held at the Brookings Institution, Washington, March 19, https://www.

brookings.edu/wp-content/uploads/2020/03/Abraham-et-al-Conference-Draft.pdf.
117

Part 3: Federal Reserve System Research Conference

is the ratio of effective vacancies to effective job searchers. 66 The authors show that the GLMT is 

highly correlated with the standard V/U measure but is much less cyclical and is a better predictor 

of hiring. At the end of 2018, the GLMT was noticeably below the standard V/U measure, signaling 

substantially less tight labor market conditions than the standard measure.

Abraham and Haltiwanger propose constructing the GLMT on a regular basis in the future. Such a 

measure could be a helpful addition to the variety of gauges that economists routinely consult to 

assess the position of the economy relative to full employment.

Discussion

In his discussion of the paper, Jared Bernstein observed that the maximum-employment goal 

in the Federal Reserve’s mandate is very broad and is difficult to capture with a single statistical 

measure such as the GLMT. He noted evidence showing that the GLMT was about as good in 

explaining the variance in core inflation or growth in nominal wages as some widely used measures 

of labor market slack, such as the unemployment rate; for that reason, he suggested that the 

Federal Reserve add the GLMT to the dashboard of labor market indicators it monitors regularly.

Finally, Bernstein offered a broader lesson for policymakers: The diminished responsiveness of 

inflation to constraints in labor and product markets, together with the benefits associated with 

high-pressure labor markets in bringing about opportunities for disadvantaged groups, creates an 

asymmetry in favor of a monetary policy that keeps interest rates low for a long time.

Questions from the audience covered a range of issues, including the extent to which the GMLT 

could be used to gauge the effect of labor market slack on wages and prices; the potential 

benefits of pushing the labor market beyond full employment; how the GLMT relates to other 

measures of labor market tightness; whether technological changes that have sharply reduced 

the costs to employers of posting job vacancies might have resulted in a structural break in the 

authors’ measure of recruiting intensity; the difficulty of distinguishing cyclical from structural 

influences on search intensity; and structural factors that may be inhibiting labor market 

performance for lower-skilled workers.67

Session 3: Global Dimensions of U.S. Monetary 

Policy

In “Global Dimensions of U.S. Monetary Policy,” 

Maurice Obstfeld explores the main channels 

through which global factors affect tradeoffs for 

the Federal Reserve’s monetary policy.68 He focuses 

on three broad areas: (1) the influence of global 

factors on the U.S. inflation process; (2) the effects of 

66 Abraham and Haltiwanger produce three measures of generalized labor market tightness. Because the movements in these 

measures are highly correlated, they are referenced here as “GLMT.” Their work builds on that of Robert E. Hall and Sam SchulhoferWohl (2018), “Measuring Job-Finding Rates and Matching Efficiency with Heterogeneous Job-Seekers,” American Economic Journal: 

Macroeconomics, vol. 10 (January), pp. 1–32

67 A detailed review of the audience discussion is available on the Federal Reserve Bank of Chicago’s website at https://www.

chicagofed.org/~/media/others/events/2019/monetary-policy-conference/session-2-audience-qa-summary-pdf.pdf?la=en.

68 See Maurice Obstfeld (2020), “Global Dimensions of U.S. Monetary Policy,” International Journal of Central Banking, vol. 16 

(February), pp. 73–132.
118

Fed Listens | Perspectives from the Public

growing financial integration on the downward trend in interest rates in recent decades and the 

transmission of shocks; and (3) the role of the U.S. dollar in international markets, its influence on 

the transmission of U.S. monetary policy to the rest of the world, and spillback effects to the U.S.

economy.

Obstfeld reviews several ways to measure the economic interconnectedness between the United 

States and other economies—the U.S. share of world GDP, shares of U.S. exports or imports in 

domestic GDP, and U.S. gross foreign assets or liabilities as a percentage of domestic GDP. The 

last measure, which captures financial openness, has risen steadily and significantly since 1990.

Obstfeld then discusses several international factors 

that affect U.S. inflation and asks whether these factors 

have contributed to the observed decrease in the 

responsiveness of inflation to domestic economic 

slack. The Philips curve relationship links inflation to 

expectations of future inflation and a measure of slack 

in the economy; this relationship has become weaker 

in recent years. Obstfeld examines whether the weaker 

Phillips curve relationship can be explained by increased 

international competition, a stronger influence of foreign prices due to a higher share of imports, 

or changes in wage behavior brought about by globalization. He finds that the evidence for 

globalization’s role in the weakening of the Phillips curve is unclear.

Next, Obstfeld discusses the implications that movements in international financial markets have 

for U.S. monetary policy. In a world with somewhat integrated financial markets, movements in 

foreign investment demand and in the desire to save generate international asset flows that affect 

longer-term trends in the general level of interest rates in the United States. The tendency for the 

demand for safe dollar assets (that is, U.S. Treasury securities) to rise in periods of global stress 

can lead to upward pressure on the dollar and downward pressure on U.S. interest rates. Obstfeld 

points out that, in addition to overall flows, the composition of international financial flows might 

have implications for interest rates and monetary policy. As U.S. monetary policy responds to 

changes in trend movements in interest rates so as to stabilize domestic economic activity and 

inflation, the central bank needs to monitor foreign developments closely to anticipate pressures 

on interest rates and consider how changes in exchange rates will affect financial flows.

Finally, Obstfeld discusses policy considerations resulting from the special role that the U.S. dollar 

plays in the global economy and international financial markets. The dollar is frequently used in 

international trade transactions even if the parties involved in the transaction are located outside 

the United States. In addition, the dollar is often a point of reference for setting payments in 

international contracts, such as corporate bonds. This safe asset role of the dollar provides an 

additional channel for U.S. monetary policy changes to lead to an effective revaluation of the 

terms in existing contracts. Obstfeld places this channel in the context of a global financial cycle, 

where changes in U.S. monetary policy drive trade volumes, foreign asset prices, risk-taking, and 

cross-border lending. He points out that in this context, U.S. monetary policy tightening could 

have strong, negative spillovers to the rest of the world, which could then have adverse effects 

on the U.S. economy through trade and financial channels as global growth slows and financial 

vulnerabilities increase.
119

Part 3: Federal Reserve System Research Conference

Discussion

In her discussion of the paper, Kirstin Forbes pointed to several international factors—in addition 

to the ones considered by Obstfeld—that could have implications for Federal Reserve monetary 

policy: global supply chains and markups, commodity prices, international capital flows, and 

financial stability worldwide. She noted that work on this issue had not yielded firm conclusions 

and that further study was needed.

Questions from the audience covered a range of issues, including the increased influence of 

U.S. monetary policy in light of the large number of countries that stabilize their exchange rates 

relative to the U.S. dollar; the spillover effects of the Federal Reserve’s asset purchase programs 

and how those effects compare with spillovers associated with interest rate policy; the importance 

of Federal Reserve communications about the influence of foreign developments on the U.S.

economic outlook; whether the dollar swap lines in the aftermath of the financial crisis had 

promoted the issuance of dollar-denominated debt outside the United States; and whether, if the 

spillover effects of monetary policy are not fully buffered by changes in exchange rates, it might 

make sense for central banks to take account of these spillovers and not pay attention solely to the 

effects that spill back on their domestic economies.69

Session 4: Federal Reserve Communications

Stephen Cecchetti began the presentation by noting 

the tremendous progress the Federal Reserve 

has made since 1993 with regard to transparency.

Transparency of monetary policy is key in fostering 

democratic accountability and enhancing central 

bank credibility. Federal Reserve communications 

reinforce the institution’s commitment to achieving 

its statutory goals of maximum employment and 

price stability. In “Improving U.S. Monetary Policy 

Communications,” Cecchetti and coauthor Kermit Schoenholtz evaluate the FOMC’s monetary 

policy communication practices and offer recommendations for their improvement.70 The 

authors’ analysis was informed by 24 interviews, conducted in person or in writing, of leading 

academics, financial market economists, and former Federal Reserve officials. In these interviews, 

Cecchetti and Schoenholtz asked open-ended questions about the primary objectives of FOMC 

communications, how FOMC communications should evolve in coming years, and the greatest 

challenges to effective FOMC communications.

Cecchetti and Schoenholtz outline three objectives that should underlie any changes in FOMC 

communications: (1) simplifying public statements while continuing to convey the divergence of 

policymakers’ views; (2) clarifying how monetary policy reacts to changing economic conditions; 

and (3) highlighting policy uncertainty and risks.

69 A detailed review of the audience discussion is available on the Federal Reserve Bank of Chicago’s website at https://www.

chicagofed.org/~/media/others/events/2019/monetary-policy-conference/session-3-audience-qa-summary-pdf.pdf?la=en.

70 See Stephen Cecchetti and Kermit L. Schoenholtz (forthcoming), “Improving Monetary Policy Communication,” in E. Pasten, R. Reis, 

and D. Saravia, eds., Independence, Credibility, and Communication of Central Banking (Santiago: Central Bank of Chile).
120

Fed Listens | Perspectives from the Public

With regard to the first objective, the authors believe that 

FOMC communications should aim to reach the broadest 

possible audience, and that doing so requires “plain 

English.” In their view, simplicity in communication is a 

cornerstone of the FOMC’s democratic accountability.

Moreover, clear communication of FOMC decisions and 

the rationale for those decisions supports central bank 

independence.

With respect to the second objective, conveying how monetary policy will respond to changes in 

economic conditions was the topic most frequently mentioned by interviewees.71 Providing the 

public with this type of information can yield important stabilization benefits because monetary 

policy is fundamentally a forward-looking endeavor. Cecchetti and Schoenholtz argue that clear 

communications about how the FOMC would react to changes in economic conditions could 

provide a form of commitment that can lead to better economic outcomes.

Regarding the third objective, the authors believe that communicating the uncertainty about 

the likely evolution of the economy and the policy path is essential. In particular, they note that 

emphasizing the median projection in the Summary of Economic Projections (SEP) conveys a false 

sense of certainty and does not highlight the range of policymakers’ views.72

Cecchetti and Schoenholtz discuss how policymakers can revise and improve their existing 

communication vehicles to meet the three objectives. First, the authors consider the Committee’s 

annual Statement on Longer-Run Goals and Monetary Policy Strategy as the foundation for all 

monetary policy communications. They take the statement as given and do not offer proposals for 

improving it, although they recommend making clear the linkage between the goals statement 

and other key FOMC communications.

Next, Cecchetti and Schoenholtz recommend changes to three other important communication 

vehicles. The authors suggest simplifying the statement issued by the FOMC after each of its 

meetings in order to broaden public understanding of the Committee’s most relevant written 

description of its actions, the rationale for those actions, and ongoing concerns. Cecchetti and 

Schoenholtz also suggest that the postmeeting statement should provide greater room for 

dissenting policymakers to explain their views.

In addition, the authors recommend a simplification of the FOMC meeting minutes, streamlining 

them to explain the Committee’s actions to the public more clearly. The authors also propose 

reorganizing the sections in the minutes to highlight the Committee’s decisions, rationale, and 

range of views, as opposed to the current structure, which follows the agenda of the meeting.

71 The research literature refers to information on how policymakers respond to changes in economic conditions as the monetary policy 

“reaction function.”

72 The SEP, released in conjunction with the last FOMC meeting of each quarter, provides projections for real GDP growth, the 

unemployment rate, and inflation under each individual FOMC participant’s view of appropriate monetary policy.
121

Part 3: Federal Reserve System Research Conference

Finally, Cecchetti and Schoenholtz recommend converting the SEP into a concise Inflation Report.73

As they envisage it, such a report would focus greater attention on the uncertainty involved in 

policymaking and on better conveying that the FOMC would revise its economic and policy 

outlook quickly and transparently when new information becomes available. In particular, the 

authors advise publishing individual projections to convey how each Federal Reserve Board 

member or Reserve Bank president reacts to economic information and sees the joint evolution 

of key macroeconomic variables. The authors also recommend showing historical forecast error 

bands in the initial SEP press release and postmeeting press conference. The authors provide 

examples of the postmeeting statement and Inflation Report to show how their proposals could 

be implemented.

Discussion

In his discussion of the paper, Jón Steinsson noted that forward guidance has been a critical 

element of Federal Reserve communications since 1999. He reviewed the two effects associated 

with forward guidance: a “traditional” effect, in which communicating the period over which 

interest rates are expected to remain low boosts growth, and an “information” effect that results 

if the communication about low interest rates conveys that the central bank is more pessimistic 

about the economic outlook than the private sector. Steinsson saw the SEP as important in 

providing policymakers’ views about the economic outlook and recommended that the SEP be 

collected and released at each FOMC meeting. Finally, he viewed helping private-sector actors 

to understand how to translate economic developments into expected policy actions as the most 

important goal of communication.

Audience comments and questions addressed the challenges associated with communicating 

clearly to multiple audiences—the Congress, the general public, and experts in the press and 

financial markets—and whether the Federal Reserve should even be concerned with audiences 

other than the financial markets, given that monetary policy is transmitted to the economy via 

financial market prices.74 Many in the audience offered their own detailed recommendations 

for communications, with much of the discussion centering on how best to convey information 

about uncertainty and risks as well as the merits of providing additional detail on the individual 

projections in the SEP. Other comments concerned the importance of communicating about how 

the Committee would alter interest rates in the face of new information about the economy and 

how the Federal Reserve might best talk about a new approach to monetary policy were it to 

adopt one as an outcome of its strategic review; such communications would be key, given that 

the effectiveness of monetary policy hinges on public understanding. Finally, there was discussion 

about the confusion that can arise when the Committee’s communication (in the FOMC statement, 

for example) is at odds with the SEP, which reflects each individual’s view about appropriate 

monetary policy and the resulting economic outlook.

73 The authors view the Bank of England’s Inflation Report and its brief visual summary, “In a Nutshell,” as providing a template for 

the Federal Reserve. In November 2019, the Bank of England’s Inflation Report became the Monetary Policy Report. “In a Nutshell” 

from the most recent report, released in May 2020, is available on the Bank of England’s website at https://www.bankofengland.co.uk/

report/2020/monetary-policy-report-financial-stability-report-may-2020.

74 A detailed review of the audience discussion is available on the Federal Reserve Bank of Chicago’s website at https://www.

chicagofed.org/~/media/others/events/2019/monetary-policy-conference/session-4-audience-qa-summary-pdf.pdf?la=en.
122

Fed Listens | Perspectives from the Public

Session 5: Monetary Policy Strategies

Lars Svensson’s paper, “Monetary Policy Strategies for the Federal Reserve,” compares the 

usefulness of different monetary policy strategies for achieving the Federal Reserve’s dual 

mandate of maximum employment and price stability.75 Svensson’s emphasis is on policy strategies 

that aim to offset, at least in part, previous misses of inflation from the central bank’s inflation 

goal—these types of strategies are often referred to as “makeup strategies.” Such strategies, if 

they are well understood by the public, can provide automatic stabilization during periods when 

policy interest rates are near zero. Based on an assessment of the challenges associated with 

securing public understanding for a new monetary policy strategy, the author recommends the 

adoption of flexible average inflation targeting (FAIT) rather than flexible or temporary price-level 

targeting (FPLT or TPLT, respectively).

Svensson advocates implementing a makeup strategy 

through setting the path of the policy rate to guide the 

forecast paths for the central bank’s goal variables to best 

fulfill the central bank’s mandate—an approach known 

in the research literature as “forecast targeting.” Under 

this approach, the central bank communicates its policy 

intentions by publishing its intended policy rate path and 

its forecasts for its goal variables, such as unemployment 

and inflation. This approach allows the central bank 

to reveal the manner in which it intends to adjust, over time, its published policy rate path in 

response to incoming information.

Svensson looks at three specific strategies for monetary policy: Under flexible inflation targeting, 

the Federal Reserve adjusts the federal funds rate to keep a weighted average of an inflation 

forecast and an unemployment forecast close to maximum employment and 2 percent inflation.

In Svensson’s view, flexible inflation targeting is a good characterization of the Fed’s current 

approach to policy. In particular, the Federal Reserve’s price-stability mandate is reflected in the 

desire to keep the inflation forecast close to 2 percent, while the full employment component 

of the mandate is captured by the forecast for the unemployment rate. Under FPLT, instead of 

adjusting policy to keep inflation close to 2 percent, the Fed instead aims to keep the level of 

prices close to the path that would result if inflation rose every year by 2 percent; unemployment 

continues to be taken into consideration.76 Finally, under FAIT, the inflation component reflects a 

forecast for inflation over several years. Svensson also discusses the proposal of TPLT advanced by 

Ben Bernanke.77

75 See Lars E.O. Svensson (2020), “Monetary Policy Strategies for the Federal Reserve,” International Journal of Central Banking, vol. 16 

(February), pp. 133–93.

76 Under the Fed’s current strategy, inflation that runs above or below 2 percent in a given year is not taken into account in subsequent 

years. Thus, misses of the inflation goal are not made up.

77 See Ben S. Bernanke (2017), “Temporary Price-Level Targeting: An Alternative Framework for Monetary Policy,” Ben Bernanke’s Blog,

October 12, https://www.brookings.edu/blog/ben-bernanke/2017/10/12/temporary-price-level-targeting-an-alternative-frameworkfor-monetary-policy; and Ben S. Bernanke (2017), “Monetary Policy in a New Era,” paper presented at “Rethinking Macroeconomic 

Policy,” a conference held at the Peterson Institute for International Economics, Washington, October 12, https://www.brookings.edu/

wp-content/uploads/2017/10/bernanke_rethinking_macro_final.pdf.
123

Part 3: Federal Reserve System Research Conference

Svensson discusses each of the four strategies 

and their implementation through the lens of 

forecast targeting. He points out that flexible 

inflation targeting does not attempt to make use 

of private-sector expectations for future monetary 

policy to balance the central bank’s goals over 

time. By contrast, the other three policies include 

an important “makeup” aspect that attempts to 

undo, at least in part, previous misses in the longrun inflation objective. If the public fully understands such a makeup strategy and believes that 

the Fed will follow through with it, an inflation shortfall today should bring about expectations of 

higher inflation in the future. This understanding and belief associated with a makeup strategy 

have two advantages: First, because expectations of future inflation likely affect inflation today, 

the initial drop in inflation is reduced. Second, expectations of higher inflation reduce current 

and expected future real interest rates—that is, interest rates after adjusting for the effects of 

inflation—even while the policy rate is near zero. As a result—and in contrast to flexible inflation 

targeting—the economy receives an additional stimulus.

In order for a makeup strategy to deliver the expected stabilization benefits, it is key that the 

public believes the central bank will take actions consistent with the strategy—when the strategy is 

believed, it is said to be “credible.” In Svensson’s view, implementing makeup strategies through 

forecast targeting may help secure this credibility. Under forecast targeting, the central bank 

routinely lays out published paths for the policy rate and its goal variables, and economic agents 

can hold the central bank accountable for its actions. Svensson argues that under FPLT, earning 

this credibility may require hard and unpopular choices, in particular in times when the economy 

experiences unexpected increases in prices, which would necessitate an extended period of low 

inflation and high unemployment in order to return the price level to its previously announced 

path.

Bernanke’s suggestion of TPLT may offer a way for the central bank to avoid some of the 

unattractive features of FPLT when the policy interest rate is not close to zero and still benefit from 

the stabilizing properties it generates when that rate is near zero. Under Bernanke’s approach, the 

central bank attempts to make up only the inflation misses that occur when interest rates are near 

zero and discards the strategy once inflation has sustainably returned to its target.

Svensson expressed concern that Bernanke’s temporary approach to price-level targeting may 

not work. His reasoning is that the temporary approach leaves little opportunity for households 

and businesses to learn about the strategy, limiting the ability of the central bank to establish the 

credibility that is needed for economic benefits to arise from the strategy.

Svensson views another strategy, FAIT, as an attractive compromise between FPLT and TPLT. Under 

this approach, to maintain average inflation over a particular length of time near its long-run 

inflation goal, the central bank actively seeks to avoid prolonged periods of inflation under or over 

the goal. In contrast to FPLT, FAIT does not attempt to undo all past inflation misses. Nevertheless, 

if credible and well understood by the public, it still delivers some of the “automatic stabilization” 

benefits of price-level-based approaches. The property that current inflation that undershoots the 

central bank’s goal generates higher inflation expectations over the next few years (with associated 
124

Fed Listens | Perspectives from the Public

improvements in output stabilization) also holds under FAIT. Similarly, if inflation is above the 

central bank’s goal, higher real interest rates result because the public lowers its expectations of 

future inflation, in turn cooling the economy and restraining any incipient uptick in inflationary 

pressures. Because FAIT involves being less ambitious about making up past inflation misses 

and constitutes a less dramatic departure from the Federal Reserve’s current policy strategy, the 

Federal Reserve may find it less challenging to establish credibility for FAIT than FPLT.

Discussion

Sharon Kozicki focused her remarks on practical considerations in implementing the different 

policy strategies. She pointed out that the success of makeup strategies depends critically on 

assumptions about how the public forms its expectations for inflation, and these assumptions 

may not be valid. These strategies, therefore, may not prove to be robust, as expectations may 

not behave as economic models require, especially during a period of adjustment. Kozicki argued 

that the temporary policies may be more robust because they do not rely as heavily on specific 

assumptions about expectations. She also noted that policies relying on observed values, such as 

past inflation, may be easier to explain to the public and so could lead to more rapid changes in 

the public’s understanding of the policy. She pointed out that the temporary policies would likely 

lead to some overshooting of the central bank’s goal for inflation, a key feature that is shared 

with the policies that Svensson prefers. Finally, Kozicki noted the risk-management benefits of 

temporary policies: Because of the asymmetry that policy interest rates cannot fall below zero but 

can rise well above zero, it may be appropriate to run the risk of overshooting the central bank’s 

inflation goal.

Questions from the audience covered a range of issues. One key question was what policymakers 

could do to bolster inflation expectations in order to align those expectations with policymakers’ 

inflation goal. A particular concern was that U.S. inflation as measured by the price index for 

personal consumption expenditures had been running below 2 percent in recent years and could 

have a potentially destabilizing effect on expectations. Svensson noted that, ideally, inflation 

should be countercyclical—that is, higher in recessions than in normal times. An issue with forecast 

targeting was the risk that it could lead to highly unpredictable policy, a situation that might lead 

to an unmooring of inflation expectations. Conference participants also discussed nominal income 

targeting, another policy strategy, with a number of them arguing that this approach might have 

better properties than suggested by the analysis in Svensson’s paper.

Session 6: Monetary Policy Tools

In their paper, “Evaluating Central Banks’ Tool Kit: Past, 

Present, and Future,” Eric Sims and Jing Cynthia Wu 

develop an analytical framework to evaluate forward 

guidance, negative interest rate policy, and asset 

purchases, three policy tools that were used by central 

banks during the financial crisis, since then, or both.78 The 

authors argue that asset purchases are the most effective 

of these three tools because the magnitude of forward 

78 See Eric Sims and Jing Cynthia Wu (2020), “Are QE and Conventional Monetary Policy Substitutable?” International Journal of 

Central Banking, vol. 16 (February), pp. 195–230.
125

Part 3: Federal Reserve System Research Conference

guidance or negative interest rates necessary to achieve the same macroeconomic outcomes is 

large. They acknowledge that asset purchases entail costs, but they view these costs to be more 

manageable than for the other two policies.

The analytical framework that Sims and Wu employ introduces several frictions aimed at providing 

channels for the unique aspects of the policies to operate. First, the framework incorporates 

a feature that allows asset purchases to affect asset prices and, ultimately, macroeconomic 

outcomes. Put simply, the authors assume that only financial intermediaries have access to 

long-term bond holdings, for institutional reasons. Because financial intermediaries can declare 

bankruptcy, the interest rate on deposits differs from the rate of return on long-term assets. As a 

result, changes in asset supply can affect asset prices.

Second, in the analytical framework, the central bank 

is able to set reserve requirements. Thus, the interest 

rate paid to banks on their excess reserve balances 

with the central bank may fall below the rate on 

deposits offered by banks to depositors, an outcome 

that is consistent with what has been observed in the 

euro area. This feature allows the authors to explore 

possible limitations on the effects of negative interest 

rates.

Third, the degree of credibility of the monetary policymaker can vary, and it determines the degree 

that communications about expected future policy—forward guidance—pass through to privatesector expectations. With these frictions, the authors then introduce the three policy tools.

When the degree of the central bank’s credibility is high, forward guidance can have sizable 

effects. In Sims and Wu’s framework, the effects of forward guidance are limited if credibility is not 

complete. In this case, alternative policies, including negative interest rates, may be warranted.

The authors demonstrate that negative interest rates operate much like forward guidance by 

lowering the expected future path of deposit rates. Because there is inertia in the interest rate rule 

for the desired rate, the paper argues that negative interest rates serve as a commitment device to 

lower deposit rates in the future.

The authors argue that when the policy interest rate is near zero, purchases of government or 

private debt securities can have larger effects than either forward guidance or negative interest 

rates. These greater consequences result because the central bank’s asset purchases are more 

effective in decreasing long-term interest rates contemporaneously, rather than only indirectly 

through future expected deposit rates.

Consistent with the experience of several major central banks, the paper finds that asset purchases 

may lead to a large stock of assets on the central bank’s balance sheet when interest rates are no 

longer near zero. Therefore, Sims and Wu also consider the implications of policy decisions to 

shrink the size of the balance sheet. Compared with selling assets very rapidly or maintaining a 

large balance sheet, the authors find that gradual asset sales would be the best option because 

maintaining a large balance sheet after a period when the policy interest rate has been near zero 

causes deeper recessions.
126

Fed Listens | Perspectives from the Public

Discussion

In her discussion of the paper, Annette Vissing-Jørgensen praised the authors’ construction of an 

analytical framework that allowed the simultaneous consideration of forward guidance, negative 

interest rate policy, and asset purchases. She noted, however, that even this model might not be 

rich enough, because it considered only one channel through which asset purchases can affect 

the economy. The consideration of additional channels could lead to results that are either larger 

or smaller than those in the authors’ framework. Vissing-Jørgensen also suggested other margins 

along which the model could be generalized, including the introduction of explicit corporate bond 

default risk, a housing market and mortgages that could be refinanced, and the ability to assess 

interactions with fiscal policy.

In the audience discussion, several conference participants commented on ways to make the 

model more realistic—by including, for example, an international dimension, which would allow 

the authors to explore questions such as the demand for safe assets from abroad and spillover 

effects from U.S. monetary policy to the rest of the world. There was discussion of the increasingly 

negative term premium on U.S. Treasury securities and whether there is some constraint on how 

negative the term premium could be, as well as the effectiveness of quantitative easing more 

generally. Audience members also asked about the pass-through of negative policy rates to 

private-sector interest rates and the related issue of what foreign central banks have done to 

immunize commercial banks from the adverse effects of negative interest rates.79

Session 7: Financial Stability Considerations and Monetary Policy

In “Financial Stability Considerations and Monetary Policy?” Anil Kashyap and Caspar Siegert 

discuss oversight for financial stability in the United States and make recommendations for its 

improvement.80 Maintaining financial stability is not an explicit part of the Federal Reserve’s 

statutory mandate; however, monetary policy—particularly policy tools such as forward guidance 

and asset purchases—can interact with financial stability. Therefore, the Federal Reserve has 

an incentive to identify and address risks to financial stability. Kashyap and Siegert point to the 

Financial Stability Report (FSR) as an indication that the Federal Reserve considers financial 

stability risks to be of critical importance for the country’s overall economic outlook and therefore 

for monetary policy.

A central part of the analysis is Kashyap and Siegert’s assessment of whether the current powers 

and tools that U.S. financial regulators possess are sufficient to address the vulnerabilities 

that developed before the financial crisis and the vulnerabilities identified in the May 2019 

FSR.81 The authors note that the Financial Stability Oversight Council (FSOC) does not have 

the powers necessary to combat three key pre-crisis vulnerabilities identified in earlier studies: 

(1) undercapitalization of the financial system relative to risks; (2) reliance of nonbank financial 

institutions on short-term wholesale funding; and (3) unprecedented levels of household debt, 

79 A detailed review of the audience discussion is available on the Federal Reserve Bank of Chicago’s website at https://www.

chicagofed.org/~/media/others/events/2019/monetary-policy-conference/session-6-audience-qa-summary-pdf.pdf?la=en.

80 See Anil K. Kashyap and Caspar Siegert (2020), “Financial Stability Considerations and Monetary Policy,” International Journal of 

Central Banking, vol. 16 (February), pp. 231–66.

81 See Board of Governors of the Federal Reserve System (2019), Financial Stability Report (Washington: Board of Governors, May), 

https://www.federalreserve.gov/publications/files/financial-stability-report-201905.pdf.
127

Part 3: Federal Reserve System Research Conference

particularly debt extended to nonprime borrowers.82 While the Federal Reserve’s current toolkit can 

address some of these vulnerabilities through stress testing and the countercyclical capital buffer, 

nonbank financial institutions (aside from bank holding companies) are not covered by these tools.

In addition, regulators have no tools to address vulnerabilities in the household sector directly.

The first two FSRs, in November 2018 and May 2019, 

focused on high asset valuations and the high level of 

business borrowing. Mitigating high asset prices directly 

is challenging without first understanding the underlying 

cause; furthermore, the cause may differ by asset type.

Building resilience via capital and liquidity requirements 

may be more straightforward. The FSOC and its member 

institutions have limited powers to put in place such 

requirements. While the Federal Reserve has such 

powers, increasing capital and liquidity requirements risks pushing activities out of the banking 

sector. The Federal Reserve can also use monetary policy—raising interest rates in the face of 

high asset prices—but this tool is a blunt one. And while limiting new capital to certain sectors 

could decrease business borrowing vulnerabilities, regulators have little ability to do this limiting 

systematically. The fragmented regulatory landscape does not have a clear financial stability 

mandate, and partial regulation leads to a migration of activities to institutions and sectors where 

regulation is less stringent.

The authors focus on the effect monetary policy may have on the vulnerabilities identified in 

the May 2019 FSR—elevated asset valuations and corporate indebtedness. They argue that the 

decline in the general level of interest rates in recent decades implies that newer monetary policy 

tools, such as asset purchases, may become a standard part of the monetary policy toolkit and 

potentially amplify the vulnerabilities identified by the FSR; their analysis mainly considers the 

implication of monetary policy for financial stability via term premiums in bond yields.

Kashyap and Siegert draw on the literature showing that loose monetary policy—and asset 

purchases, in particular—exerts downward pressure on term premiums and boosts prices of 

risky assets, contributing to valuation pressures across a range of asset classes. By reducing the 

return on risky assets, loose monetary policy also reduces the costs of financing for corporations, 

allowing them to increase the amount of debt funding and thus exposing them to the risk of rising 

interest rates. Rising interest rates also pose a risk to households, but to a lesser extent than to 

corporations, as mortgages—the main component of household debt—are predominantly issued 

with a 30-year fixed rate.

The authors also briefly discuss how financial stability affects monetary policy. They argue that the 

main channel though which financial stability affects monetary policy is by contributing to high 

unemployment and exerting deflationary pressure. Given the downward trend in interest rates 

in recent decades, Kashyap and Siegert argue that monetary policy has little room to address a 

standard recession, let alone a financial crisis.

82 David Aikman, Jonathan Bridges, Anil Kashyap, and Caspar Siegert (2019), “Would Macroprudential Regulation Have Prevented the 

Last Crisis?” Journal of Economic Perspectives, vol. 33 (Winter), pp. 107–30.
128

Fed Listens | Perspectives from the Public

The authors conclude by outlining three options for the Federal Reserve to address the gaps in the 

current regulatory regime. The most natural option, Kashyap and Siegert argue, is for the Federal 

Reserve to encourage the Congress to assign more power to the FSOC, as the latter body is 

better placed to deal with macroprudential policy and financial crises than monetary policymakers 

are. That said, the authors recognize the challenges presented by an environment in which postcrisis regulatory reform is largely believed to have been completed.

As a second option, the authors suggest the Federal Reserve ask the Congress to amend the 

Federal Reserve Act, making financial stability part of its mandate and expanding the Federal 

Reserve’s toolkit accordingly. For example, the Federal Reserve could be granted new powers to 

address excessive borrower indebtedness. They argue that such powers would facilitate effective 

coordination between monetary and macroprudential policies, citing the United Kingdom as an 

example where the macroprudential authority—the Financial Policy Committee—resides within 

the central bank. Kashyap and Siegert suggest that the Congress set up an expert commission 

to review systematically the post-crisis regulatory overhaul and whether it sufficiently addresses 

all financial stability risks. The commission could be modeled on the recent U.S. Commission on 

Evidence-Based Policymaking, a bipartisan effort to examine how the government could better 

use its data to inform future decisions.

The third option is for the Federal Reserve to conclude that financial stability is a necessary 

condition for achieving its goals of maximum employment and price stability and to explicitly 

incorporate financial stability considerations into its monetary policy deliberations. However, given 

that monetary policy is not the most effective policy for addressing financial stability risks, Kashyap 

and Siegert conclude that the second option of asking the Congress for additional powers is a 

“price worth paying.”

Discussion

Discussant Mark Gertler characterized financial 

stability as an “intermediate target” for the 

achievement of the Federal Reserve’s objectives for 

the macroeconomy and for price stability. He noted 

that this idea was not new, as the idea of a “lender 

of last resort” had a long history in central banking.

He pointed out many of the difficulties with using 

monetary policy to address financial imbalances: 

Doing so can be at odds with objectives for the 

macroeconomy and inflation, it can be difficult to discern financial imbalances in real time, and it is 

not clear how interest rates affect financial vulnerabilities. Gertler noted that once a financial crisis 

is under way, the principal goal of a central bank should be to offset its effects, either by reducing 

policy interest rates or by engaging in lender-of-last-resort policies that attempt to address risk 

premiums directly. Gertler echoed Kashyap and Siegert in observing that macroprudential policies 

are best suited for preventing financial crises, and he agreed with the authors’ proposals for 

improving the macroprudential toolkit, including asking for new legislation. Gertler then raised the 

question of what macroprudential policy can do better in the short term before considering new 

legislation; he concluded that keeping the banking system strong through high capital standards 
129

Part 3: Federal Reserve System Research Conference

is one clear option. He also mentioned looking ahead to threats from financial institutions that 

operate outside the regulatory perimeter.

Audience discussion focused in large part on potential paths forward for a congressionally 

established expert commission to study financial stability and potential gaps in the current 

regulatory architecture. Audience discussion also considered the optimal regulatory 

environment for financial stability: Is the central bank the appropriate place to put authority over 

macroprudential tools? Other countries have placed this power with more directly politically 

accountable institutions such as the ministry of finance. Several conference participants addressed 

the Federal Reserve’s role in promoting financial stability under the current framework. Some 

emphasized the importance of stress tests as a tool to address potential financial stability risks 

that the Federal Reserve does not have the authority to regulate directly. Others questioned the 

desirability of expanding the Federal Reserve’s remit beyond the banking sector, noting that 

Federal Reserve officials have communicated concerns about rising risks effectively and have the 

tools to ensure adequate risk mitigation within the banking sector.

131

ABBREVIATIONS

AFL-CIO American Federation of Labor and Congress of Industrial Organizations

CAC Community Advisory Council

CARES Act Coronavirus Aid, Relief, and Economic Security Act

CBO Congressional Budget Office

CDC Cornerstone Community Development Corporation

CDFI community development financial institution

COVID-19 coronavirus disease 2019

EITC earned income tax credit

FAIT flexible average inflation targeting

FAME Federation for Advanced Manufacturing Education

FOMC Federal Open Market Committee; also, the Committee

FPLT flexible price-level targeting

FSOC Financial Stability Oversight Council

FSR Financial Stability Report

GDP gross domestic product

GLMT generalized measure of labor market tightness

HVAC heating, ventilation, and air conditioning

IMF International Monetary Fund

LIHTC low-income housing tax credit

LMI low and moderate income

OECD Organisation for Economic Co-operation and Development

PPP Paycheck Protection Program

R&D research and development

SAG-AFTRA Screen Actors Guild-American Federation of Television and Radio Artists

SEP Summary of Economic Projections

SLATE St. Louis Agency on Training and Employment

SNAP Supplemental Nutrition Assistance Program

TANF Temporary Assistance for Needy Families

TPLT temporary price-level targeting

UI unemployment insurance

V/U ratio of vacancies to unemployment
132

Fed Listens | Perspectives from the Public

Board of Governors of the Federal Reserve System

www.federalreserve.gov

0620