Head of KC Fed expects continued, moderate economic growth for US
TULSA — The past 10 years have seen the U.S. economy move from a deep recession and an unemployment rate climbing toward 10 percent to a record-long recovery and the lowest unemployment rate in nearly 50 years.
Rising interest rates and the length of the current recovery have some pundits convinced that another recession is inevitable, while others believe that recent tax cuts and increased spending will help propel the recovery further.
Esther George, president and CEO of the Federal Reserve Bank of Kansas City, said there is reason to expect continued moderate growth in the future.
“By nearly every measure, the U.S. economy is performing well,” she said. “With accommodative financial conditions, elevated levels of confidence and solid labor markets, it seems reasonable to expect economic growth slightly above trend with low and stable inflation for the next few years.”
George was the keynote speaker at an economic forum luncheon Thursday at the Mayo Hotel, where she provided an update on the U.S. economy.
She noted that capital expenditures seem poised to continue at a robust pace as economic growth remains solid, borrowing costs remain low and rising labor costs combined with labor shortages lead firms to invest in technology to automate tasks.
Unemployment, currently at 3.7 percent, remains well below most estimates of its long-run sustainability level, and employment gains are averaging 190,000 jobs per month for the past three months.
“My own interpretation of these gains is that we are seeing the hallmarks of a mature expansion,” George said. “At its peak in early 2015, the year-overyear change in total payrolls was roughly 3 million. In contrast, the latest data point to a year-over-year change in total payrolls of 2.5 million. I expect this trend of slowing employment gains to continue as labor market conditions tighten further and it becomes harder for firms to fill vacancies.”
George also discussed the roles of the energy sector and the shale revolution.
“The shale oil boom also has had myriad effects on local economies that are heavily dependent on the oil and gas extraction industry,” George said. “Some theories suggest resource abundance may increase local economic development through higher demand for labor in the energy sector and spillover spending in the local economy.
“Other theories, though, suggest industries not closely related to the resource extraction industry may be harmed as energy production expands.”
One topic George did not dive too deep into was recent comments made by President Donald Trump blaming the Federal Reserve’s raising of interest rates for the plunge in stock prices earlier this week.
On Thursday as the stock market plunged for the second day, Trump called the Fed “out of control.”
“We have interest rates going up at a clip that’s much faster than certainly a lot of people, including myself, would have anticipated. I think the Fed is out of control,” Trump said.
When asked about his comments, George said: “In my 30-plus years with the institution, the Fed has gotten credit for things it shouldn’t and has been blamed for things it shouldn’t.”