The Fed Is Making Wall Street Forecasters Pay Attention to Black Unemployment

To get an idea of what Jerome Powell’s Federal Reserve will do next, Wall Street economists are having to try their hand at forecasting new variables -- like the Black unemployment rate.

That shift in focus could itself contribute to the outcome that the Fed chair says he wants: an economic expansion reaching corners of the labor force that have been slower to recover in the past.

As the U.S. economy rebounds from the pandemic slump, Powell is spotlighting the kind of job-market metrics that will show Fed officials when it’s time to raise interest rates under their new framework, which explicitly redefines their goal of maximum employment as “broad-based and inclusive.”

Instead of across-the-board measurements –- like overall employment and wage growth -- the focus is on groups that typically take longest to regain lost ground.

That means a prominent place on the Powell dashboard for metrics like the Black unemployment rate, wage growth for low-income workers, and labor-market participation among Americans without college educations.

Those gauges are signaling there’s still a long way to go. And if investors absorb that message, it will help to reinforce the economic support being provided by easy Fed policy.