“Main Street” Talks Long-Term Pandemic Cons—and Some Pros

Professionals in select industries and geographic areas across the Eighth Federal Reserve District met with Federal Reserve Bank of St. Louis leaders in February to discuss the pressing economic issues affecting their businesses. Leaders from small businesses, public school districts, child care, labor unions and workforce development organizations shared their views on how these sectors have been adversely impacted by the COVID-19 pandemic and may continue to be affected after the pandemic is declared over. From these conversations, trends emerged that can help inform policymakers about the future path of the U.S. economy and indirectly help influence monetary policy.

How Does Main Street Influence Monetary Policy?

At this Fed Listens event (and at many other similar listening events conducted across the Federal Reserve System), policymakers learned more about what’s going on at a grassroots level in terms of labor availability, supply chain disruptions and economic equity issues, among other concerns. These roundtables are part of a broader, longstanding effort by the St. Louis Fed throughout the year to systematically listen to how its constituents on Main Street experience the economy in real time and to help inform St. Louis Fed President Jim Bullard’s views about where the economy is heading.

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Policymakers on the Federal Open Market Committee (FOMC) use the anecdotal feedback gathered in regular discussions such as these roundtables—along with analyses of incoming data that measure the economy’s performance and forecasts of future economic conditions—to help inform deliberations about monetary policy, including decisions on interest rate policy as well as other measures to stimulate or cool the economy.

Participants Noted the Lack of Labor Availability

One pressing economic concern for participants at this Fed Listens event centered around the availability of a skilled labor supply, with the following issues highlighted:

• In many dual-income earner households, one earner has left the workforce because child care is not stable.
• There is a mismatch between skills required for certain jobs and what’s available in the current labor force.
• Teachers and child care workers are quitting because of available at-home education technology jobs.
• The opioid epidemic has significantly contributed to labor shortages in some areas.

What’s the solution to the lack of available labor? Those answers varied widely. Most participants agreed that the waning pandemic could alleviate some immediate pressure on labor supply but the underlying root causes of labor shortages needed to be addressed.

For one, participants believed that focusing attention on the lack of child care centers in rural markets (so-called “child care deserts”) would allow some workers to return to the labor force. Others noted that wages needed to rise to attract new child care workers, while the cost of child care had to be reduced or subsidized by employers and/or the government so that working families could afford to return to work.

Another solution offered by participants centered on expanding the view of the labor supply to include those traditionally outside it.

“I’m talking about our veteran population, our population coming from recovery, from prisons, disabled citizens,” one participant said. “We’ve got to start figuring out a path to jobs and how do we sustain them there.”

Moreover, there was consensus by participants on the need for more workforce education and training to match the technical jobs of today and tomorrow. One participant noted that a longer-term look at U.S. public school curriculums was required to meet the future demands of the labor market, specifically to address the gap in math skills.

Participants Believed Supply Chain Disruptions Will Continue

Another pressing economic concern voiced by participants centered around supply chains.

There was consensus that the government Paycheck Protection Program (PPP) that offered loans at the outset of the pandemic helped as a stopgap measure for small businesses in shoring up liquidity and maintaining operations. However, those small businesses without a traditional banking relationship had trouble securing PPP loans, further shining a spotlight on the needs of those enterprises (often owned by members of minority groups) that operate outside mainstream banking.

In addition, the conversation highlighted that most participants believed supply chain issues will continue in the intermediate-to-longer term. One participant suggested that the trend of outsourced manufacturing was the underlying problem for supply issues—and that public policy and long-term capital needed to align to compete for and bring manufacturing back to more secure or closer locations.

Economic Equity Issues Were Exacerbated by the Pandemic, Participants Noted

“COVID has laid bare the inequities for Black folks in this country around access to health care,” observed one participant.

There was consensus among participants that the most vulnerable in the pandemic tended to be Black families and other minority groups, although white working-class families have struggled, too. Participants identified specific issues as reinforcing economic inequities, including a lack of access to broadband and education and training, while saying that changing norms brought about by the pandemic may offer some benefits on equity.

The lack of high-speed internet access and of the knowledge of how to use it was a barrier for rural communities and for women of color, noted one participant.

Another participant highlighted as a barrier to economic equity the cost and lack of education, particularly the complex financial education on mortgages, budgeting, finance and banking that small-business owners need to compete. The advanced skills and training required for highly skilled jobs was another factor participants cited.

Despite these concerns, participants pointed out there may be a silver lining of the pandemic—that is, the changing norms it is dictating.

“For once in my lifetime, it seems like people need workers more than workers need companies,” said one participant.

The Fed Listens participants noted that this factor could help influence economic equity issues in the following ways:

• Labor unions, traditionally white and male, are actively looking to build diversity in membership.
• Unions have also empowered workers in hospitality and logistics industries to demand more.
• Education programs are being brought to prisons so that those incarcerated can come out with job skills.
• Alternative training programs are now more acceptable and allow workers to get skilled jobs now and build toward degrees later.
• Virtual education allows for more accessibility for all than ever before. This can create a bigger pipeline of those entering the workforce.

The Long-Term Benefit of the Pandemic?

While deep concerns remain for these sectors adversely affected by the pandemic, participants agreed there is hope that the U.S. economy can benefit from sustainably addressing these concerns. Small business can be a growth engine for the U.S. economy, noted several participants, and with new policies tailored to meet the most pressing needs of the community, a more equitable economy can emerge from the ashes of the COVID-19 pandemic.