Amid bleak economic projections, Fed votes to keep interest rates near zero
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The Federal Reserve’s grim assessment of prospects for jobs and commerce in the age of COVID-19 sent stock futures plunging early Thursday. Federal Reserve Chair Jerome Powell said COVID-19 will cause long-term damage.
Marketplace’s Nancy Marshall-Genzer covered Powell’s news conference on Wednesday, and she spoke with “Marketplace Morning Report” host David Brancaccio to share the details.
The following is an edited transcript of their conversation.
Nancy Marshall-Genzer: The Fed voted unanimously Wednesday to keep interest rates right around zero. And it issued projections showing interest rates near zero through 2022. Powell said the lower unemployment rate reported for May was a “welcome surprise.” But he also said it was “heartbreaking” to see a slightly higher black unemployment rate, wiping out the gains in black employment we were starting to see.
David Brancaccio: And Powell was asked several times about inequality at yesterday’s briefing.
Nancy Marshall-Genzer: Right. I asked Powell about calls from some progressive economists for the Fed to pay more attention to the black unemployment rate and set a specific target for it. Powell said the Fed doesn’t “target” specific groups. That’s not part of its mandate from Congress.
But Powell said the Fed will try to keep overall unemployment low:
“And we will use our tools to support maximum employment and take that definition to heart. But obviously that’s something that will require an all of society, all of government response.”
Powell also said he’s concerned about the large numbers of Black people, Latinos and women who’ve lost their jobs during the pandemic. He pointed out that the rise in unemployment has been especially severe for them. And he wants to get their unemployment rates back down to where they were before the coronavirus crisis.
COVID-19 Economy FAQs
So what’s up with “Zoom fatigue”?
It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.
How are Americans spending their money these days?
Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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