The Federal Reserve Bank of Atlanta's Community and Economic Development (CED) team recently interviewed nearly 50 leaders of community, civic, and business organizations across the Southeast about the effects of the coronavirus crisis on communities that lack adequate resources and the organizations that serve them. Economy Matters staff writer Charles Davidson spoke with CED director of engagement Sameera Fazili about this work.
Charles Davidson: Many people may not understand the Fed’s interest in issues affecting low- to moderate-income communities, nor what the Fed does to help. Can you elaborate?
Sameera Fazili: Our interest stems from two roles the Fed plays. The first is our role supporting long-term economic growth. And the mandate for full employment and stable prices requires us to know the barriers to bringing more people into the labor market and achieving full employment. So we study and try to understand what is happening in lower-income communities, lower-wage labor markets, and entry-level labor markets. In addition, as part of the Fed’s role as a financial regulator, we try to understand what sectors of the economy, and what households and communities might not be properly served by the banking sector. We focus on providing data and evidence from research to help support what practitioners are doing in communities.
CD: Your CED staff note that the Southeast’s economy has concentrations in sectors that are particularly vulnerable during this outbreak, including tourism, transportation, and energy. And these industries tend to have a lot of workers who can’t work from home and might not have access to paid leave. Did you see evidence of that?
SF: Evidence of that showed up in terms of just how much work, jobs, and wages dominated our conversations. These phone calls and interviews were during the first week of the stay-at-home orders. The effect was so immediate that even before the unemployment numbers officially came out, we essentially knew what we were going to see in our states. The other survey result probably affected by the economic mix was one particular question we asked: What level of disruption do you think is being experienced? We had most people say recovery is going to be difficult—it’s not going to bounce back quickly.
CD: What else in the findings stands out?
SF: There was a lot of publicity around moratoriums that the federal government had issued for housing they back, or that Fannie Mae and Freddie Mac had issued for the mortgages that they back. When you talk to people who work on the ground, they said those moratoriums were not going to cover all renters and all homeowners. And moratoriums are not going to be enough given the job losses we are seeing. So in the next weeks and months you will see strains in the housing markets. You won’t see it in the data this month or maybe even next month, but you need to look for it.
On the more hopeful side, lenders were being very proactive about reaching out to small businesses to help provide some relief immediately. Whereas you often expect to hear that from more community-based lenders like community development financial institutions, we heard it from regular banks, too.
CD: Lenders in the survey said a lot of their small business customers had cash on hand to last, was it—
SF: As little as three weeks. Technology has really improved speed and efficiency, so businesses are able to operate much leaner. But I think on the flip side, that often means they don’t have big cash buffers, especially the businesses we were focused on that have fewer employees and are in lower-income neighborhoods.
CD: Is it possible to draw any broad conclusions about where things could be headed?
SF: One point we heard over and over again is how recovery takes a lot longer in these [low- to moderate-income] communities. So policymakers have to make sure there is sufficient runway and timeline in any programs that are created, or else you will have an unequal recovery and it will just exacerbate inequalities in many places.
CD: The report says civic leaders in general were in triage mode. How long do you think that will last?
SF: I think for state and local governments—especially state governments that have to balance their budgets—they’re going to pretty immediately have to figure out how to fund programs that are in high demand right now and what programs they’re going to essentially stop funding to support programs that are going to provide more immediate relief on the economic side or on the social services side. So I think you’re going to see them in triage mode for a while. In our district, a lot of states just have legislative sessions for a few months. So we anticipate that the governors are going to have to do a lot of work and likely call special sessions and whatnot to help manage the fiscal demands.
CD: Those are going to be tough decisions.
SF: I know. There were some creative things we heard. Some city-level folks, for example, said they were going to be pulling some people from parks and rec and asking them to do temporary duty in another department that has higher demand right now. They’re trying to think of ways to live within their existing means but still make sure that where there were spikes in services, they could meet them.
The other thing they were doing to be proactive is they were already thinking about how to efficiently help businesses get back up and running, so things like permits and city regulations won’t be a big barrier to businesses reopening. A restaurant has to go through a health inspection after it’s been closed for a certain number of weeks. They were already thinking about how those could be streamlined, for example.
CD: Rather than just going back to the status quo, some contacts voiced hope to maybe foster more inclusive and equitable development practices and move toward higher-quality jobs and more effective safety nets. What are keys to making that sort of thing happen?
SF: Moments like this are when communities have a real opportunity and impetus to come together in new ways. It calls you to be extra creative and do things in unprecedented ways. We saw evidence of that. You had New Orleans create a fund to support gig economy workers. That kind of support hadn’t been there before. We saw efforts in Atlanta where philanthropy and the city government pool their resources and set up some emergency grant facilities. What research suggests is that a key to more equitable development is for there to be collaboration across sectors, especially between government, business, philanthropy, and nonprofits. Research also suggests that working regionally can have some benefits as well.
CD: Clearly there’s plenty to be concerned about, but what were the hopeful signs?
SF: People were rolling up their sleeves and already trying to come up with solutions and doing their best to bring people together. They were recognizing that small business, housing, and helping people access jobs—all of them are interrelated and require people coming together to work on different parts of the program and remain coordinated. In supporting inclusive and equitable development, it’s important to see a bigger picture so you can, in aggregate, end up in a spot better than at the start of this. It was encouraging the amount of hope people have that we can make our communities better: maybe we were a little too unequal, we had too many low-wage jobs. We can do better and learn some lessons from this crisis.
CD: What’s next in this work?
SF: The CED program recently added to its engagement staff. Part of our role is to do a lot of outreach to practitioners, to policymakers, to philanthropy to make sure the data tools we’re developing and the research we’re conducting are relevant and timely to them. So we’re going to continue to do a lot of outreach to our audiences and contacts. We’re also looking for opportunities to host webinars or speak at other people’s events so we are offering them the evidence and the data they need to design effective programs.
Charles Davidson
Staff writer for Economy Matters