Since Federal Reserve’s tapering took place in the beginning of 2014, I was concerned if it could maintain its desired unemployment rate of 6.5% and inflation rate of 2% in my previous blog post Federal Reserve’s decision – tapering. April has arrived (it is hard to believe that more than 1/4 of 2014 passed already!), and data shows that the US economy is in the process of recovery from its recession from 2010.
I plotted the unemployment rate from 2008 to 2014, using FRED : Federal Reserve Economic Data website. From this graph, I could see a high increase in unemployment rate from mid 2008 to 2010 (from 4.9% to 10%), when the international economy was in a turmoil due to worldwide recession. With efforts such as quantitative easing and other monetary/fiscal policies, unemployment rate has been decreasing steadily to 6.7% as of March 2014. From the graph, it could be observed that since the tapering by Federal Reserve started in 2014, unemployment rate has been steady at 6.7%, just above the Federal Reserve’s target of 6.5%. Therefore, one could say that Federal Reserve’s tapering in 2014 was a right decision, not overstimulating the economy yet still meeting its economic goals.
However, regardless of this positive economic data there is a downside. Wall Street Journal article Five Years of Declining Unemployment Doing Little to Close Race Gaps points out the downside very well. According to the article, although the unemployment rate has been decreased steadily since October 2009, the unemployment rate gap among the race has not been decreasing much. The graph below shows this gap. Among various races, Asians and white people have relatively lower unemployment rate compared to Black or African American and Hispanic or Latino American. Furthermore, it can be seen that the gap between unemployment rate of Black or African American and White American got even bigger in 2014, compared to 2010 when unemployment rate peaked.
As we all know, economic growth and decrease in inequality are two important economic goals. It is a good thing that the US economy is getting better, despite Federal Reserve’s decision of tapering in 2014. However, a way to decrease the gap of inequality is still vague to me. Maybe it might be beyond the scope of economists; we are all aware that Asians and White Americans has a higher ratio of college graduate degree, and I think this is the main reason for inequality among various races. I think it is important to create policies that can encourage them to get higher education- something that monetary policies cannot be easily achieved by neither Federal Reserve nor extensive monetary policies.