The way economists see it, you are a very important number to be crunched.
That’s why what you experience in the economy as a business owner, corporate executive, employee, consumer, job seeker and retiree matters to those who look for trends.
Overall, you’re experiencing better times, for the most part, including in Northeast Florida.
“It feels really, really healthy here,” said Chris Oakley, vice president and regional executive of the Federal Reserve Bank of Atlanta Jacksonville Branch.
Oakley, who met last week with the Association for Corporate Growth’s Northeast Florida chapter, based his views not only on the Fed’s economic research but also on what he heard earlier that day when the JAX Chamber met at the bank.
He said during the past 18-24 months, he’s seen a “local shift” and “certainly reasonable growth.”
Oakley emphasized he was sharing his personal views, although he also was considering Federal Reserve data when expressing them.
The 12 regional Federal Reserve Bank branches depend on their employees to gather intelligence about their markets through interviews with those on the front lines of the economy — buying, selling, building, manufacturing, lending, leasing, growing and digging.
Oakley meets with business people for their input on the state of the economy, which he passes on to Dennis Lockhart, president of the Atlanta Fed.
“I’m hearing a lot less talk about headwinds and more that growth is taking place,” he told the group which met at the branch Thursday.
Concerns with labor force participation and wage growth
The Fed makes policies that affect the economy, which is why it closely reviews what those in the economy are experiencing.
The Federal Reserve System is the nation’s central bank and is based in Washington, D.C. It makes monetary policies to stabilize prices and moderate long-term interest rates. It also regulates banks for safety and soundness.
The Federal Reserve Bank comprises 12 regional banks among 12 districts. The Atlanta district comprises Florida, Georgia, Alabama and parts of Louisiana, Mississippi and Tennessee. Jacksonville is one of five branch banks within the district.
Within the system, the Federal Open Market Committee, known as FOMC, consists of the seven governors of the Federal Reserve Board and the 12 regional presidents of the Federal Reserve Banks.
Only five of the 12 regional presidents are voting members of the committee at any one time. Lockhart is a 2015 voting member.
Through its monetary policy actions, the committee is able to exert control over U.S. interest rates.
Oakley provided three conclusions:
• The Atlanta Fed expects the economy to expand between 2.5 and 3 percent a year over the next two years, based on increased household spending and continuing business investment. The Fed’s “central tendency” projection for Gross Domestic Product ranges from 2.3-2.7 percent this year and next year and 2-2.4 percent in 2017. Saying “this is a maturing economy,” Oakley believes the economy is at the “upper end,” if not above, that range.
• Employment should continue to grow and both unemployment and underemployment will continue to decline. However, the Fed hasn’t seen an accompanying increase in wage growth. The national unemployment rate of 5.5 percent is much lower than the 10 percent rate in October 2009, as the recession ended. It was 5 percent at the end of 2007 when the recession began.
• Inflation is below the FOMC’s 2 percent objective, most recently reflecting declines in energy prices. The Fed expects inflation to gradually rise to 2 percent over the next few years.
Oakley said based on information received since the committee’s last meeting March 17-18, economic growth has somewhat moderated, labor market conditions improved further, household spending is rising and business investment is advancing, while the housing sector recovery remains slow and export growth has weakened.
Of concern, however, is the decline in the labor force participation rate to 62.7 percent as of March. “That’s something we’re paying a lot of attention to,” Oakley said.
That rate has steadily dropped from more than 67 percent in 2000.
That rate is a measure of the active portion of an economy’s labor force and refers to the number of people who either have jobs or are actively looking for work. The number of people who are no longer actively searching for work are not included in the participation rate.
The rate decreases when people stop looking for work, including when they get discouraged and stop applying for jobs.
The unemployment rate also has been falling. However, including those working part-time for economic reasons and those who are considered marginally attached shows the rate in March was closer to 10.9 percent.
Marginally attached workers are those who hadn’t looked for work in the preceding four-week survey period but who looked for jobs in the previous 12 months.
“We still have slack in the labor market,” he said.
Oakley said another concern is the lack of wage growth, which means “you don’t have a consumer that’s spending a lot.”
‘Patience’ with rate increases
The next Fed “Beige Book” of economic conditions among its 12 districts is due Wednesday. The next FOMC meeting is April 28-29.
No hike in short-term interest rates is expected in April, but June and after could be another story.
Oakley noted that the drop of one word — “patient” — opened the door to a potential June rate increase.
The Fed’s March statement dropped an assurance it will be “patient” in raising rates. “Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” Federal Reserve Chairwoman Janet Yellen said in a news conference.
Yellen said after the March meeting the committee anticipates it will be appropriate to raise the federal funds rate when it has seen further improvement in the labor market and is “reasonably confident” inflation will move back to 2 percent. Inflation now is zero.
A recent Wall Street Journal poll found that 65 percent of the economists it surveyed expect a September federal funds rate increase, while just 18 percent expect one in June.
However, former Federal Reserve Vice Chairman Alan Blinder wrote Tuesday in the Wall Street Journal that not only does he not expect a rate increase in June, but maybe not in September.
He contends that “patience is the right policy.”
With the federal funds rate near zero for more than six years, “none of the hypothetical financial hazards have surfaced. So you don’t hear the scare stories much anymore.”
Oakley said economic growth continues, although data is showing a “pretty weak” first quarter.
“We’re looking toward a bit of a pop in the second quarter,” he said.
And don’t minimize your role.
“The consumer is still a hugely important part of the growth in our economy.”