Richmond Fed CEO talks economic trends at PIP

ROWAN COUNTY — With the economy top of mind for many North Carolinians, President and CEO of the Federal Reserve Bank of Richmond Tom Barkin talked about current market trends with labor, inflation and affordability.

Sponsored by Salisbury Academy, the October Rowan Chamber Power in Partnership breakfast hosted a fireside chat between Barkin, Catawba College freshman and Salisbury Academy alumnus Baxter Heilig and President and CEO of Lutheran Services Carolinas Ted Goins.

The trio jumped right in, addressing the impact of inflation and uncertainty on businesses. Barkin cited geopolitics, federal policy and monetary policy and their impacts on the economy as drivers of uncertainty; however, he also acknowledged the past 20 to 30 years of relative stability may be the exception, not the rule.

"We may be headed toward a higher uncertainty world. If you look through history, there have been periods that have been more stable and periods that have been more unstable. We may just be in a less stable period," Barkin said.

Considering inflation, Barkin said that its impact is "exhausting" on businesses, as they have to consider higher costs of goods and potentially pass that cost to customers.

As the population ages, birth rates dwindle and immigration slows, Barkin acknowledges that the general workforce is not growing and the jobs available do not potentially meet the wants of the workforce. Considering artificial intelligence and aging populations, Barkin expects health care jobs will be more plentiful compared to computer science, though potentially less attractive to the younger workforce.

Despite the record-low unemployment rate, the "dynamism" of the labor market is down, as companies are not hiring, according to Barkin. He attributes the downturn in employment opportunities partially to AI and also general uncertainty. However, he also stated that there are fewer young people looking for jobs, as it has been exactly 18 years since the 2008 housing crisis.

"We have a lot fewer people hiring, but we have a lot fewer workers looking for jobs, and that's created this uncomfortable balance, if I can call it that. It's balanced. It's positive. If you had a million more jobs, you wouldn't have workers for them, but it doesn't feel good to people who are graduating from school," Barkin said.

Barkin argued that the focus on AI has been on job loss but should also be on potential revenue gain as a tool for workers to use rather than be replaced. He cited customer service centers and mechanical jobs that could benefit from more readily available information with AI to support their work that could not be replaced by the technology yet.

In September, the U.S. Federal Reserve raised the interest rate target range to 3.75 to four percent. When asked about the decision, Barkin cited low unemployment rates and continued inflation.

"With inflation lingering, unemployment good, it felt like it was timely to make some adjustments," Barkin said.

When it comes to the ever-rising national debt, Barkin's conversations with legislators indicate they are waiting for voters to care about it. Barkin expects that it would take a crisis like long-term interest rate increases to put it in the public's focus.

As part of interest rate considerations, Heilig asked about unaffordable housing and how that might shift. Barkin considered the many factors keeping housing markets expensive and summarized it as a supply and demand issue not helped by subsidization.

"The construction cost is higher, the price is higher, and the interest is higher. What's the solution to this? Well, I guarantee the solution does not include subsidizing house prices, because if you subsidize purchases of houses, you're going to increase the demand with no more supply. The solution is more supply of houses," Barkin said.

Barkin commended North Carolina for having a good rate of new construction compared to neighboring states.

In the final question about the trends of consumer spending, Barkin said that despite the perception of less spending, consumer spending is the same or increased compared to last year. He split consumers into the wealthy and not wealthy. For the wealthy, he said consumption is up, as their wealth grows.

For the average and poorer groups, he argued that spending is roughly the same, as average wages have increased over the past five years. He also argued that lower-income people are getting "more creative" with their spending, like buying in bulk or living at home. With people employed and with access to gigs, he argues they will continue to spend.

Distributed by Newsbank, inc.