Lael Brainard: Why persistent employment disparities matter for the economy's health

Speech by Ms Lael Brainard, Member of the Board of Governors of the Federal Reserve System, at "Disparities in the Labor Market: What Are We Missing?", a research conference sponsored by the Board of Governors of the Federal Reserve System, Washington DC, 26 September 2017.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I want to compliment the organizers and others for gathering an outstanding group of researchers and papers for this conference.  Understanding why some groups persistently fare better than others in the job market and how these disparities may affect the economy's overall performance is vitally important to the Federal Reserve.  While opportunity and inclusion have long been central to American values, it is increasingly clear that they are also central to the strength of our economy.  

As directed by the Congress, the Federal Reserve's dual mandate is to promote maximum employment and stable prices.  In fulfilling its dual mandate, the Federal Open Market Committee (FOMC) has set a target of 2 percent for inflation but does not have a similarly fixed numerical goal for maximum employment.  That is because the level of maximum employment depends on "nonmonetary factors that affect the structure and dynamics of the labor market," which "may change over time and may not be directly measurable."  Understanding how close the labor market is to our full-employment goal requires consulting a variety of evidence along with a healthy dose of judgment.  The recognition that maximum employment evolves over time to reflect changes in the economic landscape serves us well by requiring FOMC participants to develop a nuanced understanding of labor market developments.