Federal Reserve official: There are many unknowns in economy

FLORENCE — When Anoop Mishra started a discussion Thursday, he told those in attendance to feel free to ask questions at any point during the session.

However, Mishra, vice president and regional executive at the Birmingham branch of the Federal Reserve Bank of Atlanta, cautioned they may see a trend in replies.

"You'll notice it's going to be dominated by thinks like, 'I don't know,'" he said.

Speaking at the University of North Alabama's Guillot University Center auditorium, Mishra's appearance came a day after President Donald Trump unveiled his long-anticipated tariff plans.

He said the reserve's business inflation expectation survey of chief financial officers indicate what many economists had expected.

"Most CFOs expect their costs to go up, so they also expect to raise their prices," Mishra said.

He said the new trade policies are raising questions that are difficult to answer at this point. Those include "counter reaction by other countries," which sectors and businesses will be impacted directly and indirectly, how companies will respond, and ultimately how consumers will respond.

"What if consumers say, 'Hey, we're not buying?" Mishra asked. "Uncertainties today among businesses are even higher than during the pandemic. There's just a lot of unknowns."

He said tariffs are not the only thing the Fed is watching closing. It is also seeking information on impacts from housing costs, immigration policies and artificial intelligence.

"Housing costs have really skyrocketed," Mishra said. "In some markets you can't see starter homes selling for less than $300,000 to $350,000."

He said the Federal Reserve went down on interest rates in 2024, but 30-year mortgage rates kept increasing.

There is good news, as unemployment rates remain low, Mishra said.

"People are still working," he said. "Wage growth is higher than inflation and it has been for the past year and a half."

Regarding immigration, Misha said they do not know whether that will shrink the labor supply.

He said legal immigrants make up 15% of the agricultural workforce, while unauthorized immigrants comprise 14%.

Those figures in construction are 13% for legal immigrants and 12% for unauthorized immigrants.

In personal and other service industries, 22% of worker are immigrants with nearly half of those unauthorized, Mishra said.

Immigrants also make up 20% of leisure and hospitality jobs and 19% of manufacturing jobs.

In talking with companies about the impact of AI, Mishra said most indicate they do not plan to use AI to replace existing employees.

Instead, companies are investing in AI and training employees in AI with the goal of reducing the number of workers they may have to hire in the future.

Misha said they are saying, for example, if they have 100 workers and want to double production, they want to do that by only having to hire some 70 workers rather than 100.