Friday, February 15, 2019

Federal Reserve chair notes rural lag in recovery from Great Recession, says it could hurt nation as a whole

Leflore County
(Wikipedia map)
The Great Recession officially ended in 2009, but the residents of rural Leflore County, Mississippi, are still hurting. Since 2009, "the number of jobs fell 4 percent and nearly 8 percent of the businesses disappeared," Howard Schneider reports for Reuters. "Average annual pay at private firms stalled. The median age spiked a full three years as working age adults voted with their feet and left. Home ownership rates tipped from just over half of families to below it."

Many other rural places in the U.S. are in the same boat, and federal lawmakers worry the slow rural recovery is increasing political tension between urban and rural areas, as well as hurting the nation's overall economy.

"There has been more of a recognition that what happens in low-income communities bubbles up," said Daniel Davis, assistant vice president and community affairs officer at the Federal Reserve Bank of St. Louis. The average family in rural Mississippi must spend 40 percent of its household budget on housing, which Davis observed "makes it harder to save, for the future, for college, to make the decisions that households with more 'padding' can make."

At a conference on rural poverty earlier this week at Mississippi Valley State University, which is in Leflore County, Federal Reserve Board Chairman Jerome Powell acknowledged the gap between rural and urban recovery rates, Schneider reports.

"We say we are close to maximum employment and at the national level we are," Powell said. "There are pockets that are not. The obvious way to grow the size of the economy is to bring people in that are at the edges . . . Make it easier for people to get into the labor force and stay in the labor force." But rural entrepreneurs might not be able to get loans or mentorship to start their own business in the current economic conditions, he said, which could further slow rural recovery.

"The ability of monetary policy to affect local outcomes is limited, since the Fed’s main influence on the economy is through national financial markets. Some argue that the Fed’s two years of hiking interest rates may make progress harder," Schneider reports. "But with the current trend of concentrated growth and job gains likely to get even stronger as a next wave of technology arrives, the central bank and others feel it is something they need to understand, for the future of communities like Leflore County, and for the nation as a whole."

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