Federal Reserve Chairman Jerome Powell traveled Tuesday to a historically black university in the Mississippi Delta to deliver a message that the nation’s prosperity has not been felt in many such areas around the country.
Powell said that many rural areas had been left out and needed special support, such as access to affordable credit to start small businesses and high-quality education to train workers.
In his comments, Powell did not address the future course of interest rates or the Fed’s decision last month to announce that it planned to be “patient” in its future interest rate hikes. That decision triggered a big stock market rally from investors worried that the Fed was in danger of pushing rates up so much it could bring on a recession.
Addressing the current economy, Powell said that economic output remained solid and he did not feel the possibility of a recession “is at all elevated.” He noted that unemployment is currently near a 50-year low.
“We know that prosperity has not been felt as much in some areas, including many rural places,” Powell said in an address to a conference on economic development at Mississippi Valley State University. “Poverty remains a challenge in many rural communities.”
He noted that 70 percent of the 473 counties in the United States designated as having persistent levels of poverty were in rural areas. Among the problems being faced in the Mississippi Delta, Powell said, were the loss of jobs in agriculture and low-skilled manufacturing because of automation and outsourcing of manufacturing jobs.
Powell said many rural communities have limited access to education resources.
“Mississippi is one of several mostly rural states where nearly half of residents lack access to good quality childcare, which is the main source of early childhood education,” Powell said.
Decades of research has shown that children who grow up in areas with better quality K-12 classes and with higher-quality teachers fare better later in life, Powell said. Rural areas also are at a disadvantage because of inadequate work training programs, he said.
“Rural areas where traditional industries are declining and where new employers may be moving in often experience a mismatch between the skills of local workers and those demanded by the new employers,” Powell said.
Powell also noted the impact from a long-term decline in the number of community banks due to consolidation in the industry. The Fed last year held discussions with community leaders in rural areas that had recently experienced the closure of a branch bank.
“We found that small businesses, older people and people with limited access to transportation are most affected,” Powell said.
He said the Fed had renewed its efforts to avoid unnecessary regulations on community banks to make sure federal rules were not contributing to the decline in community banks.
Asked about the Community Reinvestment Act, the 1977 law that requires the Fed and other federal banking regulators to encourage financial institutions to help meet the credit needs of low- and moderate-income neighborhoods, Powell said the Fed was committed to finding ways to provide better delivery of credit to under-served communities and not weaken the law.