Fed economist offers cautiously positive view of economy
Kevin Kliesen, an economist with the Federal Reserve Bank of St. Louis, visited Springfield on August 21 for the 2019 Economic Outlook event, and offered his view on the overall state of the national economy.
His verdict: though there may be some potential causes for concern in the future, the current economy is in a good place.
More than 430 business and community leaders attended the annual event, hosted by the Springfield Business Development Corporation, the economic development arm of the Chamber. Attendees heard from surprise special guest Senator Roy Blunt, keynote speaker Kliesen, and Ryan Mooney, the Chamber’s senior vice president of economic development.
The local picture
Mooney gave an update on project activity so far this year (see the sidebar for more) as well as what’s needed to continue competing for success.
The key, Mooney said, will be available space for new and expanding businesses and encouraging growth in population.
Population in the five-county metro area has grown at 0.9% annually since 2010 – 142nd overall but below peer cities like Fayetteville – while industrial and office vacancy rates in the city remain below 4%.
“A lot of times the site selection process is really a site elimination process,” Mooney said, referring to the process by which companies choose their next location for expansion based preliminarily on available real estate options.
He said slow population growth could be a barrier to that process, especially given that companies looking for a location to build or expand often exclude cities that don’t have metro populations of 500,000 or that don’t fall in the nation’s top 100. At the current pace, it could take Springfield a decade to meet those criteria. “I don’t know about you, but I don’t want to wait another decade to get those benefits,” he said.
The business need to increase our population is why quality of place is key to draw new people to Springfield and retain those already here – and why Mooney emphasized the importance of people participating in ForwardSGF, the city’s comprehensive planning process currently underway.
The national outlook
Kliesen said on the national front businesses have turned more cautious but consumers remain upbeat and labor market conditions remain strong. His presentation focused on four key questions that he thinks will impact the state of the national economy:
- Will job growth remain strong? – Kliesen said the answer here is a strong “yes.” The gap between the number of unemployed and the number of unfilled jobs continues to grow, and this strong demand for employees should continue to drive wages higher – they grew by 3.2% in 2018, the highest figure in a decade, and the pace continues in 2019.
- Is inflation headed higher? – Kliesen was not terribly concerned about a rise in inflation, noting that energy prices are expected to remain low, which should keep inflation in check. He noted that some economists are concerned that the record-low unemployment rate could cause inflationary pressure, but he was not convinced.
- Is a recession on the horizon? – The economist did dare invoke “the ‘r’ word,” saying that the inverted yield curve is a historically accurate signal of an impending economic downturn. The curve, combined with overall uncertainty about economic policy and the future, could be an issue. But Kliesen added prediction models “are all over the board” and in a recent survey of business economists, only one-third predicted a recession by the end of 2020.
- Is the Federal Reserve done lowering interest rates? – The country’s central bank had previously said more interest rate increases were on the horizon, but they are not taking a “wait and see” approach based on the current economic uncertainty. Financial markets are expecting rate cuts, though Kliesen said “the data do not uniformly support this view.”
Overall, Kliesen said he is not as pessimistic as some who have predicted an impending recession. “I think we can expect weaker, but still solid, growth for the rest of 2019,” he said.
SBDC Project Update
- 28 leads, up from 23 in 2018
- Three project wins with 3 more pending announcement
- 313 new jobs
- $13M new payroll
- $43,000 average wage
- $83M in new capital investment
- 433,000 sq. ft. in new construction