As the Fed Tightens, Will a New Round of Lay-Offs Follow?

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(ThyBlackMan.com) We are in a new economy where up is down and down is up. Damn if you do and damn if you don’t. The national unemployment rate for blacks in February clocked in at 10.4 percent. That rate is an increase from January, which was 10.3 percent and matches December’s unemployment rate for African Americans. In the last three months, African Americans as a group have seen their unemployment rate increase, even as the national rate decreased. Consider this or rather give the following some thought; 2009 was the year the economy emerged from the deepest recession since the 1930s, due to the fallout resulting from the housing crisis. The recession or contraction of the economy began in December 2007 and ended in June 2009, according to the National Bureau of Economic Research. They determined this in September of 2010, as they looked back and charted the beginning and ending of the economic downturn.

The national unemployment rate peaked at 10.0 percent in October of 2009. However, the black unemployment rate did not peak until August of 2011 at 16.7 percent.  The current rate of black unemployment, as indicated above, is higher than the 10.0 percent peak of the unemployment rate reached nationally in 2009. When you consider the black unemployment rate has not been under 10.0 percent for the last seven years, you can profoundly appreciate the overall dismal economic state of the black community. At the end of day, whether a given worker group is gainfully employed matters. This cannot be sloughed off with statements like “there are plenty of jobs, they just don’t want to work” or “they just want to start at the top with the easy jobs.” These numbers are revealing andblack-national-unemployment-rate-2015 demonstrate the need for a national job creation plan now, as the Obama administration, and indeed this country must face the fact that this economy is not producing enough good jobs
(http://www.thefixthistime.com)! African Americans are dealing with some very tough and difficult economic realities.

The Federal Reserve Bank (Fed), our central banker, fought high “unemployment rates” caused by the Great Recession through aggressively cutting interest rates beginning in 2008. Through cutting interest rates, the Fed created an atmosphere which led to job creation based on easy money.  Having maintained interest rates at historic lows, near zero, the Fed is now preparing to raise interest rates. Not everyone benefited equally as the Fed lowered interest rates based on the above black unemployment numbers. The national unemployment rate for February is 5.5 percent and the white unemployment rate for the same period is 4.7 percent. Whites have benefited handsomely from reduced interest rates. Thus, the larger population, Hispanics and Asians as measured worker groups, have all benefited and have single digit unemployment rates. Nevertheless, the Bureau of Labor Statistics (BLS) states there are still officially 8.7 million Americans unemployed, and 2.7 million or 31.1 percent of those are long term unemployed (those jobless for 27 weeks or more).

With these conditions as the backdrop the Fed is considering raising interest rates, perhaps as soon as June of this year. Why is the Fed doing this you may ask? Many of us know as the cost of money increases, there is a good possibility hiring will slow or even stop, as higher interest rates cut into the profits of businesses. Especially, with so many workers unemployed, and the African American unemployment rate at 10.4 percent, why would the Fed risk an economic slow down that could cause unemployment to get worst? Don’t they know there are millions of people out of work, well beyond the stated government official number of 8.7 million workers (experience teaches us the government is not always accurate)? Furthermore, those of us who closely follow these numbers agree that the true unemployment rate is higher by as much as two to five percent or more.

The short answer to the question of why the Fed is considering raising interest rates at this time maybe that the Fed is out of bullets to use in the event of another financial crisis. If interest rates are already at or near zero and a financial crisis strikes the American financial system as devastating as the housing crisis, what tools would the Fed have available to use? It can’t very well lower interest rates which are already at zero to stimulate or revive the economy. Additionally, a new round of quantitative easing (QE) would not go down well with the investment community and Republicans in Congress who are the new majority as the Fed balance sheet currently is over four trillion dollars. You see, the Fed simply printed the money it used as part of its QE program, which aided in keeping interest rates near zero. Some economists and many in Congress just were uncomfortable with that maneuver.

An example of what the Fed did would be similar to you using the Fed’s one hundred dollar bill plates along with its printing presses and for the last six years, you printed money in your basement to pay your bills. That is what the Fed did in essence. It paid the federal government bills from 2008 to 2014 through printing money! It then used that money to purchase government debt in the form of bonds, and those bonds are still on its balance sheet. Please note, the money used for these purchases did not come from collected taxes and tariffs! Therefore, in an attempt to exercise leverage over the economy, in the event a new economic bubble bursts or some yet unforeseen financial debacle occurs, the Fed has chosen to increase interest rates. The question arises as the Fed tightens, will the black unemployment rate increase?

African Americans are in the unfortunate and unenviable position of being the worker group that is the first laid-off as the economy turns downward. Whites, nor Asians or Hispanics have this distinction among worker groups followed by the BLS. Therefore, blacks are in a way the canaries in the mine in the Fed’s grand experiment. The Wiktionary (a dictionary of sorts) defines the canary in the mine concept the best. Its states it an allusion to caged canaries (birds) that miners would carry down into the mine tunnels with them.

If dangerous gases such as methane or carbon monoxide leaked into the mine, the gases would kill the canary before killing the miners, thus providing a warning to exit the tunnels immediately.  Well, as the Fed raises interest rates, blacks will no doubt be affected first as a group because of their reputation of being the first laid-off, however, as with the miners, there is no exit for them. Will this experiment be successful or will this recovery fail? The Fed is suggesting they can incrementally increase interest rates or rather increase the price of money without increasing the unemployment rate. “What do you think?” When I look at this scheme, it reminds me of Marvin Gaye’s song. Gaye had it right when he asked, “What’s Going On?” Tell me what’s going on?”

Staff Writer; James Davis

This talented brother is a graduate of Florida A. and M. University(FAMU), a former stockbroker, and a human rights activist who resides in Sanford, Florida. He was awarded the prestigious Governor Haydon Burns Scholarship to attend FAMU and while at FAMU was awarded the first Martin Luther King Scholarship. He is also author of three books, among them are “The Fix This Time,” Expanding Social Security Benefits to Create Jobs and Spur Demand( http://www.amazon.com/dp/B00MI3PD2M ) and “Hey…God’s Talking To You,” The Study Book ( http://www.amazon.com/dp/B00GYI3VQW ).

He can be reached through his blog @, (http://www.thefixthistime.com).


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