Atlanta Fed president: “Slower [economy] doesn’t necessarily portend a crisis”

Kai Ryssdal, Daisy Palacios, and Sean McHenry Nov 14, 2019
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"The longer these expansions are able to go, that provides more opportunity for the last ones in," says Raphael Bostic, president of the Federal Reserve Bank of Atlanta. Daisy Palacios/Marketplace

Atlanta Fed president: “Slower [economy] doesn’t necessarily portend a crisis”

Kai Ryssdal, Daisy Palacios, and Sean McHenry Nov 14, 2019
"The longer these expansions are able to go, that provides more opportunity for the last ones in," says Raphael Bostic, president of the Federal Reserve Bank of Atlanta. Daisy Palacios/Marketplace
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For Raphael Bostic, president of the Federal Reserve Bank of Atlanta, how people are feeling about the economy matters. Bostic is in charge of the Federal Reserve’s 6th District, which includes six states that, according to Bostic, have an industry makeup similar to the national economy. But what keeps him up most at night? Psychology.

“Marketplace” host Kai Ryssdal visited Bostic at the Atlanta Federal Reserve branch. The following is an edited transcript of their conversation.

Kai Ryssdal: Thanks for taking the time to do this.

Raphael Bostic: Of course. You know, I’m a big “Marketplace” fan. I listen to you guys all the time.

Ryssdal: That’s very nice of you to say. How are we doing?

Bostic: Pretty good, mostly pretty good. You know, every now and then I get a little tense about things.

Ryssdal: Well look, say more about that. What are you tense about right now?

Bostic: So a couple things. One is just how Americans live their economies very differently. And the way we talk about it, I fear, doesn’t actually speak directly to a lot of folks. And so when I came here, it was very interesting. I drove around, they flew me around. I had never lived in the Southeast. So to represent the district, I really felt like I needed to go see things. I’ve become more acutely aware of the split in how people are experiencing the economy. And that’s leading to the splits in how we talk about what America is. And so a lot of the fractured nature of our political discourse really does, in some ways, I think, revert back to these different realities of how people are living day to day.

Ryssdal: Say more about that, because obviously on “Marketplace” we spend a lot of time talking about the Fed. But we do it in terms of Jay Powell said this today, the Fed did that today. And I guess the question is: What should we be talking about in terms of the Federal Reserve and the central bank that maybe we’re not?

Bostic: So I’d say a couple of things. So one is that we actually are in a lot of communities. Just about every Reserve bank has a lot of activities and initiatives that are designed to help communities be better and to address some of their challenges and weaknesses. Now, I was in Meridian, Mississippi, for example, and had good conversations with their business leadership about what their challenges are and what kind of solutions are out there for them. Same thing in eastern Alabama. I was in Jacksonville and Anniston, and they wanted to talk about business strategies to try to attract new populations. These are things we actually have a lot of expertise about. But I go around a lot of folks who say I didn’t know the Fed even cared about housing or any of these sorts of issues. And that’s independent of the macro stuff, which you guys cover a lot.

Kai Ryssdal, left, with Bostic.

Ryssdal: One of the things that’s happening nationwide, and Chair [Jerome] Powell talks about this a lot, is that one of the reasons the Federal Reserve is so intent on maintaining the conditions for the expansion to continue is that the lower part of the income spectrum is just now, 10 years into this expansion, feeling it. How much does that weigh on you as, not a member of the Fed writ large, but as the guy running the 6th District?

Bostic: I worry about this a lot. Now, let me say just just one thing on this. This idea that the recovery has been uneven is more generic than just families across household levels. So there are a bunch of metro areas that are just getting back to where they were in terms of employment, in terms of house value. Historically, when we have these business cycles, lower income families, minorities, they’re the last ones to get in. And so the longer these expansions are able to go, that provides more opportunity for the last ones in. The thing that I worry about is I want to make sure those last jobs are sustainable. We have a lot of history that shows that when the economy goes too aggressively beyond what you would call full employment, that there’s often a recession that comes after that, and a lot of those jobs go away. And so the last in are often the first ones out. So I want to make sure that as we do this, we don’t go so hot and so fast that those jobs are not sustainable jobs and that families wind up losing their station.

Ryssdal: What keeps you up at night in this job?

Photos from Bostic’s inauguration hang on his office wall.

Bostic: I worry a lot about psychology. The consumer is chugging along, there’s all this noise that’s going around, and there’s always a question of to what extent is that noise going to affect or change people’s sentiment? Are people going to get worn out and just say, like, I’m out, or they’re going to just keep their head down and keep going? And that’s the consumer side, but also businesses. I know you talk to a lot of businesses. I do the same. And what they’ve told me so far is, “You know, we’re not going to jump out and do a lot of significant wild, bold actions until we know what the rules are.”

Ryssdal: Let me pick that apart a little bit. First of all, the consumer bit. Since you’re a listener, which by the way, thank you, you know that we spend a lot of time talking about consumers, and they’re the ones driving so much what’s going on in this economy. How can that possibly be sustainable?

Bostic: Well, it can be sustainable as long as economic growth is sustainable.

Ryssdal: Well, wait, hold on, so economic growth now is slowing.

Bostic: Slowing, but not slow.

Ryssdal: OK. Fair.

Bostic: I think it’s important to make a distinction between slow and slower. When you think about what a long-run sustainable growth rate is, given labor productivity, it’s about 1.8% to 1.9%. So this year, we will still be above our long-run sustainable level. So in my models, we expected this to be a slower year than 2018. And we expect 2020 to be slightly slower than 2019. So slower does not necessarily portend crisis.

Ryssdal: Part two of what you were just talking about: businesses and them saying, “Well, we’re going to wait and see how things go.” There’s a lot of uncertainty out there right now. If you’re running a business, why would you do anything different?

Bostic: I don’t need you to do anything different. Look, 2018 for many businesses was a record-breaking year. So if they’re just staying at record-breaking levels, we should be good. So I don’t need them to be bold. I need them to not freak out. I need them to have confidence that their existing business models are models that are sustainable over time. My hope is that they continue to see signals that support that so they keep going forward.

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