Federal Reserve, Yelp Show US Economy Recovering

Data from two sources show the US economy recovering swiftly. In testimony on June 22, 2021, before the Select Subcommittee on the Coronavirus Crisis, U.S. House of Representatives, Federal Reserve Chair Jerome H. Powell noted:

“Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades. Much of this rapid growth reflects the continued bounce back in activity from depressed levels.”​

Confirming the Fed’s analysis, Yelp’s June 2021 Economic Recovery Report noted that:

“Consumer interest — measured by counting a few of the many actions people take to connect with businesses on Yelp: viewing business pages or posting photos or reviews — demonstrates how people are engaging with local businesses, in turn providing insight into how the economy is recovering.

From an initial dip at the onset of the pandemic, consumer interest in several major categories including restaurants, shopping and travel points to a healthy recovery for local economies.”​

By State

According to Yelp,

“California’s most recovered categories are pets (recovered to 118% of 2019 levels), food (recovered to 95%), and auto (recovered to 94%). Florida, Texas, and New York’s most recovered categories are home services (recovered to 121%, 110%, and 91%), pets (recovered to 117%, 113%, and 102%), and auto (recovered to 115%, 110%, and 112%). Colorado’s most recovered categories include, auto (recovered to 110%), home services (recovered to 107%), and local services (recovered to 101%) and Indiana’s most recovered were home services (recovered to 122%), shopping (recovered to 107%), and food (recovered to 92%).”​

By Metro

Yelp noted that “​..metro areas known for being seasonal getaway hotspots have recovered beyond 2019 levels as Americans took advantage of remote working and opted to leave populous cities for less populous towns.”​

Uneven Impact

Chairman Powell stated that “The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African Americans and Hispanics.”​

There are several steps the Fed can take to mitigate this uneven impact, as the data above suggests. As we noted in 2015, Black unemployment would be reduced with a set of Federal, State and local infrastructure projects designed to significantly impact critical infrastructure needs in Black communities.

We again suggest the Fed purchase, via one (or more) of the many programs listed below, corporate, municipal and state securities with a high and positive Black Employment Multiplier (BEM).

1. The Federal Reserve established the Municipal Liquidity Facility to help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities. The facility was designed to purchase up to $500 billion of short term notes directly from U.S. states (including the District of Columbia), U.S. counties with a population of at least 500,000 residents, and U.S. cities with a population of at least 250,000 residents.
2. The Federal Reserve established a Main Street Lending Program (Program) to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic.
3. The Federal Reserve Board established a Commercial Paper Funding Facility (CPFF) on March 17, 2020, to support the flow of credit to households and businesses.
4. The Federal Reserve Board established a Primary Dealer Credit Facility (PDCF) on March 17, 2020, to support primary dealers.
5. The Federal Reserve established the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18, 2020, made loans to financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.
6. The Federal Reserve established the Primary Market Corporate Credit Facility (PMCCF) on March 23, 2020, to provide companies with access to credit. This facility was open to companies (none of them Black) as of March 22, 2020.
7. The Federal Reserve established the Secondary Market Corporate Credit Facility (SMCCF) on March 23, 2020, to support credit to employers by providing liquidity to the market for outstanding corporate bonds.
8. The Federal Reserve established the Term Asset-Backed Securities Loan Facility (TALF) on March 23, 2020. TALF enabled the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
9. The Federal Reserve is supplying liquidity to participating financial institutions through term financing backed by the Small Business Administration’s Paycheck Protection Program (PPP), PPP loans.

Thus, we see that the Fed has tools to address this problem. The Fed simply has no desire to address the problem.