for release on delivery 2 : 00 p. m. edt ( 1 : 00 p. m. cdt ) september 27, 2017 labor market disparities and economic performance remarks by lael brainard member board of governors of the federal reserve system at “ banking and the economy : a forum for minority bankers, ” a conference hosted by the federal reserve bank of kansas city kansas city, missouri september 27, 2017 i would like to thank president george and her staff at the federal reserve bank of kansas city for inviting me to participate in today ’ s conference, which is a joint effort of the federal reserve banks of atlanta, kansas city, minneapolis, philadelphia, richmond, and st. louis as well as the federal reserve board. 1 diversity in financial services as you may know, this is the second minority bankers forum hosted by the federal reserve system. diversity and inclusion are important to the strength of the banking industry, and therefore i am pleased that the federal reserve system is sponsoring this conference. among other benefits, diversity and inclusion strengthen organizations by improving deliberations and decisionmaking. banks with more diverse workforces are also better able to reach broader groups of customers, especially customers who have historically been underbanked, when they show that serving those customers is a top priority. one of the most effective ways of showing a commitment to a diverse customer base is showing a commitment to a diverse workforce. we now have substantial empirical evidence documenting the benefits of diversity in broadening the range of ideas and perspectives that are brought to bear on solving problems, and thereby contributing to better outcomes, in research, policy, and business. studies suggest that increased diversity alters group dynamics and decisionmaking in positive ways. microeconomic experiments and other research have confirmed these ideas. one experiment found that greater racial diversity helped groups of business students outperform other students in solving problems. and another found i am grateful to amanda roberts and christopher smith for their assistance in preparing this text. the remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. - 2similar benefits from gender diversity. a study of 2. 5 million research papers across the sciences found that those written by ethnically diverse research teams received more citations and had a greater influence than papers by authors with the same ethnicity. 2 as a bank regulator, the federal reserve has an interest in promoting diversity in the financial services industry. for example, the federal reserve bank of chicago is actively engaged in

are likely to save a much larger proportion of any additional income they earn relative to households in lower income groups that are likely to spend a higher proportion on goods and services. 7 disparities by race and ethnicity when we disaggregate the economy - wide labor market statistics, we find significant and persistent racial and ethnic disparities. 8 in august, the national unemployment rate of 4. 4 percent, which is low by historical standards, masked substantial differences across different demographic groups. as shown in figure 1, unemployment rates ranged from 3. 9 percent for whites to 4 percent for asians, staff calculations from forthcoming scf data ( to be released on september 27 ) ; for additional analysis of these data, see bricker and others ( forthcoming ). see bernstein ( 2013 ) and alichi, kantenga, and sole ( 2016 ) for more on the potential link between income and wealth inequality and consumer spending. for a discussion of gender disparities, see yellen ( 2015 ). - 75. 2 percent for hispanics, and 7. 7 percent for african americans. labor force participation rates, shown in figure 2, also differ substantially, although by less than unemployment rates, with the rate for african americans lowest at 62. 2 percent. these differences are not a recent development - - similar differences across racial and ethnic dimensions have existed for as long as these data have been collected. even more striking, a significant portion of the gaps in unemployment rates across racial and ethnic groups cannot be attributed to differences in their underlying characteristics, such as age and education levels. 9 although the differences in employment rates between racial and ethnic groups are still quite large, they have narrowed recently, after having widened considerably during the recession, and are near their lowest levels in decades. differences in unemployment rates across racial and ethnic groups tend to widen sharply during recessions, as less advantaged groups shoulder an outsized share of total layoffs, and these differences shrink during recoveries. for example, in the second quarter of 2017, the unemployment rate for black adult men was a little more than 3 percentage points higher than for white adult men. this differential, while sizable, is nonetheless close to the smallest gap seen since comparable data became available in the mid - 1970s. differences in unemployment rates are similarly near historical lows for black women relative to white women, and for hispanics relative to whites. since racial disparities tend to get smaller throughout the course of an economic expansion, it seems likely that