Creating jobs for younger Americans is crucial to the successful future of the economy, former Chair of the Board of Governors of the Federal Reserve System Janet Yellen said April 15.
Yellen emphasized developing appropriate monetary policy and ensuring a stable financial system in the wake of the crisis-inducing economic downturn as chair following the 2007 to 2009 Great Recession, she said at the Tanous Family Endowed Lecture. The fund for the annual lecture, which was established by Peter Tanous (CAS ’60) in 2010 to commemorate the 40th anniversary of Lauinger Library, organized the Lohrfink auditorium event.
Serving as chair from 2014 to 2018, Yellen advocated for a focus on job creation as the economy recovered from the global financial crisis, she said at the event.
“The financial crisis took a huge toll on the American economy. Unemployment reached 10 percent in 2009, which is close to the post-Second World War high, and nine million jobs were destroyed,” Yellen said. “With respect to monetary policy, my focus, first and foremost throughout my entire tenure, was on jobs.”
Although a significant upturn in the economy has been seen since the financial crisis, the low number of Americans from ages 25 to 54 who are in the labor force is concerning, according to Yellen. Developing technologies and globalization have caused a lack of low-skill jobs in the United States, impacting the unemployment rate of people in their peak working years.
“Prime-age labor force participation plummeted after the financial crisis,” Yellen said. “It’s still about half a percentage point below its precrisis level. It’s hard to note how much further it will rise because it’s been on a downward trend for about two decades, reflecting the disappearance of jobs for less-skilled workers due to technological change and globalization.”
This generational disparity, however, is not the only challenge facing the labor market, according to Yellen. Yellen highlighted the racial inequality of unemployment rates in the United States, both before and during the recession.
“The African-American unemployment rate stood at a not-very-low 8.3 percent in 2006; it rose to a horrifying 16 percent in 2009,” Yellen said.
At the time of her historic appointment as the first female chair in February 2014, Yellen said she was eager to reinstate prerecession policies to spur economic growth as the American economy improved.
“I hoped and expected that with the economy recovering from the financial crisis, it would prove appropriate to normalize monetary policy,” Yellen said. “Namely, to gradually scale back the enormous monetary policy measures that were put in place after the financial crisis.”
Yellen was appointed as chair of the Board of Governors of the Federal Reserve System, the central banking system of the United States, by President Obama in 2014 after years of experience working for the system.
Yellen served as a member of the Board of Governors of the Federal Reserve System beginning in 1994 under President Bill Clinton (SFS ’68), as president of the Federal Reserve Bank of San Francisco beginning in 2004 and as the vice chair from 2010 until her appointment as chair in 2014.
In addition to serving in highly experiential economic policy positions, Yellen also has a background in academia and research. She is a faculty member at the University of California, Berkeley, and a Distinguished Fellow in Residence for economics at the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy.
Looking forward, Yellen sees international cooperation as critical to increasing and enhancing large-scale economic growth. She coordinated with other countries through global finance organizations as chair to work to avoid the globalization of future crises.
“We coordinated efforts here with those of other countries through the Basel Committee [on Banking Supervision], the Financial Stability Board, and the Group of 20 to ensure that efforts in one country to tighten standards will not be undermined through shifting of risky activities abroad,” Yellen said.
The Fed is taking these measures and others to ensure financial markets can respond more swiftly and comprehensively to future economic declines to avoid global crises like the Great Recession, Yellen said.
“One of the most important concerns now facing the Fed is how monetary policy can respond to a future downturn,” Yellen said. “It is something you will likely hear more about in the next few years.”