Governor Michelle W. Bowman delivered an address at the Uneven Outcomes in the Labor Market Conference held in Washington, D.C. The Governor conveyed the importance of small businesses and entrepreneurship in the U.S. labor market and underscored the significance of access to capital for business owners through a pre-recorded video presentation.
Governor Bowman articulated the Federal Reserve’s dedication to promoting maximum employment and price stability. She emphasized the crucial need for a robust economy that benefits both employees and employers. The Governor reiterated the Fed’s support for a labor market that fosters the growth and success of small businesses.
Leveraging her extensive banking experience and tenure as a Federal Reserve Governor, Bowman shared personal stories of entrepreneurs she encountered. These narratives shed light on the challenges faced by small business owners in hiring and retaining employees, as well as obtaining funding for their operations.
Despite the hurdles, Governor Bowman highlighted the pivotal role of small businesses in the U.S. economy, as they employ nearly half of the private sector workforce and account for over 60 percent of net new jobs since 1995. Therefore, supporting these businesses is imperative for economic growth and stability.
Furthermore, Governor Bowman addressed the impact of the COVID-19 pandemic on small businesses, particularly those owned by women and minorities. While many businesses were adversely affected, there was a notable increase in new business creation following the lockdown period. This surge, especially amongst minority owners, has been instrumental in addressing employment gaps and fostering job growth.
Recognizing the importance of external funding in business growth, Governor Bowman underscored the necessity for small businesses to have access to affordable credit and capital. Data from the Fed’s Small Business Credit Survey revealed that many businesses heavily relied on personal sources for capital, highlighting the need for external funding to support their expansion and stability.
Governor Bowman stressed the essential role of community banks in providing access to capital for small businesses. She emphasized that community banks are well-positioned in relationship banking and are adept at evaluating the creditworthiness of local small businesses. Additionally, small businesses reported higher satisfaction with their experiences dealing with small bank lenders compared to larger institutions or finance companies.
The Federal Reserve has actively supported community banks in their efforts to provide capital to underserved populations, such as Minority Depository Institutions (MDIs), Women-Owned Depository Institutions (WDIs), and Community Development Financial Institutions (CDFIs). These banks have played a crucial role in small business lending, especially during times of crisis. The collaboration between the Federal Reserve and the U.S. Treasury Department, including the Paycheck Protection Program (PPP) and the Emergency Capital Investment Program (ECIP), has further facilitated access to capital for small and minority-owned businesses.
In conclusion, Governor Bowman reaffirmed the Fed’s commitment to supporting the growth of start-ups and small businesses, thereby creating opportunities for all workers. She anticipated engaging with community banks to address the evolving landscape of small business financing and encouraged ongoing discussions about labor outcomes.
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