The economic importance of small businesses – and improving minority entrepreneurs’ access to the capital needed to grow those businesses – were in focus at the first annual Financial Summit at the Federal Reserve Bank of Boston.

Leaders and researchers joined New England entrepreneurs for discussions on topics including the economy and racial wealth disparities. Growth strategies for small businesses were also front-and-center at the May 18 summit, which was hosted by the Bank’s Office of Diversity, Equity & Inclusion in partnership with the Greater New England Minority Supplier Development Council.

Bank President and CEO Susan Collins spoke about the critical role small businesses play in the national economy, including employing about 60 million people – roughly half of the U.S. private sector workforce.

“Small firms are an economic lifeline for communities across the country,” she said. “And small business ownership offers promising pathways that allow people to create their own jobs and provide employment opportunities. (These businesses) are also an asset that can be passed on to future generations.”

Council President and CEO Peter Hurst noted small business owners and entrepreneurs of color face key financial and operational challenges, including barriers to funding.

“This summit is critically important because it’s not just about getting contracts. It’s also about providing (entrepreneurs of color) with the tools they need to get access to capital,” Hurst said.

Analysts discuss wealth inequality, supporting small businessowners

Boston Fed Vice President Danny Best said the summit’s goal was to offer annual education and support for supplier diversity. He described the Bank’s own supplier diversity program as a proactive business strategy that seeks to give minority- and women-owned businesses equal access to opportunities.

Members of the Boston Fed’s Regional & Community Outreach and Research departments shared presentations on wealth inequality, procurement, and the current economic outlook. Then, participants attended panels on how lenders assess borrowers’ creditworthiness, business growth through mergers and acquisitions, and working with investors.

Mike Evangelist, a senior policy analyst in the Bank’s Regional & Community Outreach department, spoke about growing wealth inequality and racial wealth gaps in the U.S. He discussed the importance of wealth in allowing families to meet emergency expenses, invest, pay for higher education, start businesses, retire, and leave an inheritance to the next generation.

The Boston Fed is currently leading a research initiative on wealth with community partners that involves surveying 5,000 households across Massachusetts.

“We’re really trying to get a comprehensive economic picture,” he said. “We measure poverty at the state and local level, why not wealth?”

Keenen Grooms, a senior community development analyst, spoke about the Boston Fed’s work in the Racial Equity Municipal Action Plan program, which trains Massachusetts city governments to develop plans that improve racial equity through workforce development and other efforts. He said this work ties closely to the Federal Reserve’s dual mandate by maximizing employment, and it also helps close racial wealth gaps, as research shows that businesses of color are more likely to hire workers of color.

“As you strengthen and bring contracts to those businesses, they’re going to be hiring individuals who historically have had the highest levels of unemployment,” Grooms said.

Economic outlook provides insight on workforce, housing market, inflation

Senior Bank economist Bo Zhao gave an economic update on the national and regional labor force, the housing market, and inflation.

Zhao said non-farm payroll employment is generally up following the pandemic, but some New England states haven’t fully recovered, and employment growth by sector has shifted. For instance, professional and business services and construction have continued to grow through March 2023, but sectors including leisure and hospitality have declined.

Labor force participation rates also remain low compared to pre-pandemic levels, which is significant given New England’s aging population and the decision of many older workers to retire early during COVID-19.

Zhao added that housing price appreciation has been trending upward since 2008, and it spiked after COVID-19, before dropping again in late 2022. Meanwhile, costs are generally higher around the region. According to the consumer price index, inflation increased significantly in 2021, and it remains well above pre-pandemic levels, he said. Fuel and utilities in Boston have increased more than 20% since March 2022, and food and shelter costs also rose across the U.S.

"Consumers are more concerned about the future,” he said.

Learn more about the Financial Summit and watch a recording of the event on bostonfed.org.