Janet Yellen's departure from the Fed is a huge loss for anyone who cares about unemployment

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  • Janet Yellen is presiding over her last meeting as Federal Reserve chair.
  • She will leave a big gap in the institution she led for four years, the first woman to do so in the central bank’s over 100-year history.
  • Not only is Yellen a towering figure with deep institutional knowledge, her unique focus on the job market also helped the US economy do better than many predicted was possible.

Federal Reserve chairs often deliver their marquee speeches at business or economics conferences. Janet Yellen kicked off her term in 2014 by giving a speech on community and workforce development in Chicago, emphasising the importance of diversity and focusing on issues like race and inequality.

That sensibility was reflected both in her research as a labour economist and her advocacy of aggressive policies to lower unemployment, first as Fed vice chair then as its first female leader – even in the face of sharp doubts and criticism from politicians and even internal critics.

The emphasis also helped give greater prominence to the Fed’s community development function, which is aimed at addressing broader labour market challenges including poverty and inequality.

Donald Trump had every reason to reappoint Janet Yellen, but chose not to. Instead, he replaced her with Jerome Powell a current Fed governor and a former private equity chieftain. This week Yellen is presiding over her last meeting as chair.

Economic growth was steady if unspectacular under her tenure, but Yellen did her best to counter an often austerity-driven fiscal policy with a low interest rate policy that has allowed the recovery to continue, even if it raises some market risks as stocks reach for new heights.

Sam Bell, a Fed watcher who works at the Management Center, a Washington, DC non-profit focused on social issues, has an illuminating Twitter thread that shows just how much Yellen was pushing the envelope on policy, in a way that allowed the unemployment rate to fall to 4.1% – far below what most officials expected could be achieved without driving inflation higher.

The thread is below, but here’s the takeaway: When most policymakers in a position to do something about US unemployment rate had given up on marginalized Americans, Yellen always kept her faith in them.

“They thought unemployment would be permanently higher,” wrote Bell. “Not Yellen. She kept the faith. Year in and year out from then and until now she kept telling her colleagues-we can do better! More people can come back into the workforce!”

Yellen was on the right side of history. Unfortunately it wasn’t enough to secure her reappointment.

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