Federal Reserve officials acknowledge that they need to do a better job on recruiting diverse candidates, noting that central bank policy-making would benefit from a wider array of perspectives.

“We’re not at all satisfied with where we are,” Fed Chairman Jerome Powell told Congress on Wednesday.

A New York Times piece last month noted that of the Fed’s 870 total Ph.D. economists, only 11 are Black. In other words, Black voices make up only 1% of an institution’s economic team responsible for driving economic policy for a nation that is 13% Black.

In the over 100-year history of the Federal Reserve system, none of the system’s 12 regional outposts had a Black leader until 2017, when Raphael Bostic was named president and CEO of the Federal Reserve Bank of Atlanta.

“In some degree, it's a byproduct of the structural realities that we have in our society,” Bostic told Yahoo Finance in February.

At the New York Fed, executive vice president Beverly Hirtle said the key is improving the pipeline of diverse candidates into the Fed. Hirtle said the bank is engaging with Historically Black Colleges and Universities (HBCUs) and minority communities to recruit talent.

“We have been less effective at bringing in underrepresented groups, underrepresented minorities,” Hirtle told Yahoo Finance on Thursday.

Hirtle said the economics profession also faces challenges in diversity of gender, with women receiving only 35% of Ph.Ds in economics each year. Hirtle added that the challenge extends beyond how to recruit women, but to retaining them as well.

Improving labor market outcomes

Within the context of the pandemic, the Fed is grappling with how to help those underrepresented groups.

More women have also exited the labor force during the pandemic than men, in part due to child care needs.

For Black communities, the difference between the overall and Black labor force participation rates are now as large as they were in 2016, undoing progress made after the financial crisis.

Although the central bank cannot explicitly target unemployment rates by gender, race or other demographic factors, the Fed has committed itself to being more patient with any pullback in easy money policy in the hopes that those communities can recover jobs.

“Our tools, of course, affect unemployment generally, but we're going to look at those as a form of slack in the labor market and hope that there's progress there,” Powell told reporters March 17.

Claudia Sahm, a senior fellow at the Jain Family Institute who served at the Fed as an economist, said that the Fed’s endgame should extend beyond improving diversity metrics.