The main reason the Federal Reserve insists that Americans should not worry about the risk of runaway inflation is that Alexia Figuera got it from a hotel she has worked in for 15 years.
Last March, Figuera was working as a waitress at the Kimpton Nine Zero Hotel in Boston, waiting for the call to return. The job helped her family buy a home, insure the health insurance of her two children.
Last week, Figuera learned that he had been fired by dozens of others.
“Recovery seems to be coming soon, but when they sent me a letter saying I had no job, they seemed to be holding me back from recovery,” said Figuera, 39. “Finding another hospitality job means it’s hard for me right now.”
By many estimates, the economy is projected to grow at the fastest pace in four decades this year, in support of President Biden’s $ 1.9 trillion stimulus package for more immunizations. The better picture is that economists are debating whether such a sharp turnaround overheats the economy to stimulate decades of inflation cycles unseen.
The Fed is not worried. The explanation for this usually involves academic discussions about what constitutes inflation or what the mathematical link between unemployment and “prices” is.
But this time the answer is also much clearer. Despite the headline numbers, the economy is still in poor shape for millions of Americans. And for many workers like Figueroa, jobs may not return, even if the economy is booming again.
The sad reality becomes even more acute when the Biden administration launches its infrastructure package, designed to deal with global climate change, to rebuild America’s roads, bridges, and other infrastructure. The package could provide additional support to the economy in the coming years, but there are more challenges ahead, especially as coronavirus cases rise again in the United States.
During all this time, the scars of the epidemic are far from cured.
The leisure, hospitality sector, which employs mostly women and people of color, has shrunk by almost 3.5 million jobs, or about 20% of its pre-epidemic level. Employees, who accounted for less than 25 percent of earners, saw unemployment rise to about 22 percent in February, up from a total of 6.2 percent, according to a recent speech by Federal Reserve Governor Lael Brainard.
Economists say many of the still 9.5 million jobs in the job market will gradually return. But it is not clear how long it will take, that the work will disappear forever. Businesses are increasingly seeking technology և automation to reduce labor costs, making long-term unemployment risks more difficult for some of the country’s most vulnerable workers.
The gloomy picture shows the darker side of the Fed’s plan to keep interest rates close to zero. Historically, the Fed has raised interest rates and slowed the economy so that inflation does not slide too high, even at the cost of higher unemployment.
Now the Fed is buying a new book that tolerates higher inflation if it means more people can find work.
But if all that growth leaves people like Figueroa behind, the Fed’s way of getting as many people back to work as possible will even be hard to fake.
“Although the outlook has been significantly brighter, the fog of uncertainty surrounding the virus has yet to completely disappear. The effects of ‘current employment’ and inflation are far from our goals,” Brainard said.
Federal Reserve Chairman ome Jerome Powell has long said that controlling the epidemic is the best way to improve the economy. Vaccines help people get back to work that depends on contact with the person, Powell says. Because people spend money on long-awaited vacations and leisure, hotels and concert halls will be able to, for example, pay employees back.
But some jobs may never return. In his speech, Brainard cited a December study that found about half of the chief financial officers of large firms and one-third of those of small firms who said they “used or planned to use automation or technology to reduce dependence on the workforce.” »
Many companies already had plans to automate work before the epidemic. But Robert Kaplan, chairman of the Federal Reserve Bank of Dallas, told The Washington Post that the epidemic accelerated that change. Kaplan says it ‘s hard to think of a business in his area that is growing in Texas, parts of Louisiana, New Mexico that does not mention automation, and ways to cut costs in their conversations.
Restaurants use technology for online pre-orders Կ pickups, Kaplan said. Package delivery and logistics centers are on the same path. Call centers that have been researching automation are likely to step up their efforts.
In other cases, the business says it cannot predict how quickly customer demand will return when the epidemic ends, which can cause them to hesitate to hire again.
“What I hear from small businesses, from medium-sized businesses, from big businesses, is that now, where possible, they are looking for ways to use more technology than in the past, to work thinner, to be more efficient,” he said. is Kaplan. he said.
Such persistent shifts in the labor market could be a crucial test for the Fed. It is assumed that the central bank should prevent inflation, the annual change in the price of goods, services, հասց bring the economy to full employment. Its main political lever remains in the interest rates that the Fed can raise or lower depending on developments in the economy.
Inflation has lagged behind the Fed’s 2% target for years, even as unemployment fell years after the Great Depression. This dynamic challenged the long-held view that when the labor market tightened, employers would raise wages to compete for fewer workers, and prices would rise as enterprises incurred high labor costs for consumers.
Inflation is expected to rise rapidly this year, but Powell says any price increase will be temporary and will not hit the economy as a whole. Still economists և Wall Street investors are trying to figure out how much inflation the Fed will tolerate before the rate hike.
It will be just as important how the Fed judges progress in the job market, especially for low-wage people of color who did not benefit until the tail of the Great Recession.
Rafael Bostick, chairman of the Federal Reserve Bank of Atlanta, described the unequal recovery as a “descriptive feature” of the economic downturn. In a speech last week, Bostic cited discrepancies in wages, gender, race and industry, saying that bridging gaps “is essential if we are to create stronger economic growth”.
When it comes to monetary policy, Bostik said it would not be enough to look at the overall unemployment rate.
“I will commit to pushing back the idea that we are all fine if the gross number is at a certain point, but some of these target populations are still in significant disaster or in a more critical type. for the period, “Bostik told reporters.
Many economists say the official unemployment rate is leaving millions of workers. They say the more accurate measure is the employment-to-population ratio, which measures the number of employees versus the working-age population.
The ratio of black workers is 7.2 percentage points lower than that of white workers, which is 77.8%. Consensus is 6.2 percentage points lower for Hispanic workers than for white workers. In October 2019, in addition to the low pre-epidemic level, each increase by about 3 percentage points, according to Brainard.
Measuring how many people are out of work is one of the challenges. Understanding this unusual, complex crisis is another matter.
Abigail Wozniak, an economist at the Federal Reserve Bank of Minneapolis, says there are still “many stars” in assessing the health of the US economy. The three phases of incentive checks, increased unemployment benefits, and a number of other relief measures have all helped families stay afloat for the past year.
Unprecedented levels of fiscal support, for example, make it difficult to draw clear conclusions about the labor market. At the same time, Wozniak notes that not all Americans have been able to get help, further blurring the picture.
“Unemployment is much worse than we have seen in the past, but the level of support is much better,” Wozniak said. “And so when we try to create this image of overall well-being, we are just in a very new area.”
Eventually, the flood of congressional support will disappear. Businesses that are experimenting with thinner staff or automation may decide to do so.
And economists fear that the longer people stay out of the workforce, the harder it is to get back.
“While there is some activity, it’s fair that the economy is going to recover quickly, we’re going to see a lot of growth. on salaried employees և women.
That is Figueroa’s concern.
Figuera, from El Salvador, said she depended on incentive payments and extended unemployment benefits to support her family. Her husband also works as a server host, but he works only two days a week.
She is afraid of what it means to lose her job for the financial stability of her family, she is worried about paying off her mortgage loan. The 26 local union, which represents the majority of Kimpton Nine Zero’s staff, said the company had breached its contract and had no reason to fire its employees. The hotel said in a statement that its actions “comply with the union’s long-standing contract.”
Other Boston hotels have pledged to recall their staff if business returns, making it harder for them to find work. Figuera says he has training, but he needs the job.
“We are here, ready to work,” Figuera said. “We already know our job, so we should not train so much. We know what we do, we love what we do. ”