A new Federal Reserve survey shows four in 10 Americans could not afford a $400 emergency without going into debt, contradicting the predominant view among Fed officials that the economy is at "full employment."

The Fed's minutes, due for release later Wednesday, are likely to focus on the bright side of economic conditions in order to justify ongoing interest rate increases.

The Fed's own Community Advisory Council warns that "when the Federal Reserve chooses to raise interest rates, among the other results is higher unemployment levels and preservation of racial inequities in employment."

Federal Reserve officials don’t seem to be reading their own reports.

US central bankers have been touting a "full employment" economy for over a year now, ever since the jobless rate started approaching 4%.

It now stands at 3.9%, and yet a new Fed survey reveals a very different, glass-less-than-half full reality. It found around two in five adults face a "high likelihood of material hardship," such as an inability to afford enough food, medical treatment, housing or utilities. About four in 10 said they could not meet an unexpected expense of $400 without taking on credit card debt or borrowing money from a friend.

What gives? Call it the headline effect. The problem with looking at economic data superficially is that it masks deeper economic problems.

A look at trends in wages (mostly stagnant) and temporary employment (increasingly permanent) helps explain the gap between what the Fed sees as a humming economy — one that warrants continued increases in interest rates — and the difficulties still faced by millions of American workers.

Minutes from the Fed’s April meeting, due out at 2 p.m. Wednesday, will likely focus on the bright side of things. After all, the Fed is encouraged that inflation is finally heading toward its 2% target after a long-standing undershoot, and officials believe the job market is about as good as it’s going to get. That’s why Wall Street expects the central bank to raise borrowing costs several more times this year and next.

But if things were truly as rosy as the Fed’s overall outlook suggests, there’s no way so many millions of families would feel as precariously as the central bank’s own survey indicates.

As the chart below shows, the percentage of Americans unable to face a minor short-term financial setback has remained worrisomely high despite a gradual decline reflecting an improving economic backdrop.

Moreover, the report points to stark racial disparities in economic sentiment: "Over three-fourths of whites were at least doing okay financially in 2017 versus less than two-thirds of blacks and Hispanics," the report said.

The Fed's own Community Advisory Council, in a report earlier this month, said policymakers "should pay attention to the labor force participation rate, rates of involuntary part-time employment, labor share of income, and persistent wage stagnation to see how much room remains for the economy to grow.

The report added that "when the Federal Reserve chooses to raise interest rates, among the other results is higher unemployment levels and preservation of racial inequities in employment. There should be a very high standard with respect to raising interest rates for fear of inflation, since the consequences are dire for the most vulnerable in our society."