Reaching maximum employment will help close the racial wealth gap, according to AFL-CIO chief economist and Howard University economics professor William Spriggs.
In an interview with CNBC, Spriggs said the impact of discrimination against Black employees is less acute when the labor market operates at full employment.
"When we have a really poor labor market, white high school dropouts do better than Black people with associate degrees," Spriggs explained.
"When the labor market tightens," on the other hand, "Blacks with associate degrees do better than white high school dropouts."
While Black Americans do withdraw from the labor market when the market collapses, Spriggs said this is not always reflected in the data on Black labor force participation.
He noted that during the Covid-19 pandemic, the Black unemployment rate dropped. But the data could be misleading, with the gap between white men and Black men in the employment-to-population ratios remaining at its typical ratio of 1.2:1, Spriggs warned.
Implicit bias can also affect economic data and policy by dictating the questions that analysts ask, Spriggs said. For example, improperly phrased questions can fail to account for gig work, causing analysts to miscalculate the labor force participation rate in communities where such work is more common.
"When there is an economic slowdown," Spriggs said, "then you do see it in the Black unemployment rate first because when the economy slows down, what is slowing down initially is hiring."
"When we have these Black workers with associate degrees sitting around looking for jobs," he warned, "we put some of the best players on the bench."
Watch the video to learn more about how the Federal Reserve can close the racial wealth gap and how an economic slowdown might affect Black workers.