A Far Bigger Problem than Mr. Powell’s Fed

FOMC Chairman Powell answers a reporter’s question at the October 30, 2019 press conference.

Never turn a blind eye toward racial inequality, cautions Jason L. Riley in the WSJ.

You might not really be aware, however, that black American workers have had a pretty good run of it in recent years. The political left and its allies in the press prefer to accentuate black struggles. Mr. Riley presents some interesting stats:

Between 1963 and 2012, unemployment averaged 5.1% for whites and 11.1% for blacks. The 2008 financial crisis hit black workers especially hard, with unemployment reaching 16.8% in March 2010.

Under President Obama, black unemployment declined but didn’t fall below double-digits until the seventh year of his presidency. When he left office in January 2017, the black jobless rate was 7.5%. Under President Trump it dipped to 5.3% in August 2019, then fell to a record-low 4.7% in April of this year.

The Labor Market Remains Strong

Positive black economic trends undermine the liberal argument that we live in a society stacked against certain racial and ethnic minority groups, so these trends tend to get played down or spun to advance a left-wing agenda. Last week’s jobs report put black unemployment in June at 6%.

Bloomberg, Reuters, and other news outlets were quick to note that this was the second consecutive month that black unemployment had increased. That’s true—the rate was 5.6% in May—and perhaps a trend is developing. Still, one month of 6% unemployment is hardly cause for panic, and other data on black workers suggest that the labor market remains strong.

Jason Riley’s Antidote to Poverty

Jobs, urges Mr. Riley. The best way to help get blacks out of poverty is not by increasing the size of the welfare state. It’s by providing jobs. – the absolute antidote to poverty.

Tight labor markets have produced more employment opportunities, the result of which has been less racial inequality in hiring and wages.

Fed Chairman Jerome Powell hasn’t had an easy time of it. The Left criticizes Powell for raising interest rates aggressively over the past 15 months to combat inflation.

Some predicted that higher rates would cool consumer demand and hiring, and that blacks would be harmed disproportionately because less-educated workers have tended to be the first ones let go when the economy slows down.

That has not happened, but neither has inflation fallen to the Fed’s 2% target. It’s still to be determined whether Mr. Powell will decide to pause for now.

What we do know—and should learn from—is that erring on the side of keeping rates too low for too long did tremendous harm to millions of low-income Americans. Low interest rates played a major role in the credit boom and subsequent financial crisis. Progressives tell us that low interest rates are more socially just, but allowing people to borrow money for down payments on mortgages they couldn’t afford did the recipients no favors.

An ill-conceived effort to help low-income minorities become homeowners left them with mountains of debt and bad credit scores. By reducing the cost of a mortgage, the Fed increased the cost of real estate, which meant that some people were priced out of buying their first houses and others were stuck with subprime loans they couldn’t repay. Meanwhile, existing homeowners saw the value of their properties balloon. Loose monetary policy wound up widening social inequality.

A More Likely Outcome

Jason Riley has a suggestion to help blacks in the workforce: Rather than the Fed returning to irresponsibly low interest rates, address the racial achievement gap, which worsened under Covid. That ought to be a priority.

Which makes the nation’s teachers unions and their opposition to school choice a far bigger problem than Mr. Powell’s Fed.