ALBANY — The head of the Federal Reserve Bank of New York said Thursday that the Capital Region has avoided the stark income inequality that has evolved in some areas as the U.S. economy continues its longest-ever economic expansion.
Other parts of upstate New York haven’t fared as well, losing population as residents move away in search of jobs, John C. Williams told an audience at the University at Albany. But the Albany region has a strong and stable job base, and is an “economic success story,” he said.
As president and CEO of one of the 12 Federal Reserve banks, Williams is one of a handful of key policymakers who sit down as the Federal Open Markets Committee eight times a year and attempt to influence the U.S. economy so that prices are stable, jobs are plentiful, and inflation is neither too high or too low.
Williams, a career economist who holds a doctorate in economics and previously was president of the Federal Reserve Bank of San Francisco, is well-versed in the numbers and theories of the U.S. economy.
But he told the crowd — a mix of incoming freshmen just starting adulthood and assorted community, business and economic leaders well along in their careers — that he’s less interested in the numbers themselves than in what those numbers mean to the lives of Americans.
This can be viewed in individual detail or collective impact.
In the larger picture, the U.S. economy is in its 121st consecutive month of growth, its longest run ever. Unemployment is at a 50-year low, consumer spending is strong and inflation is low — actually lower than the Fed considers ideal. Countering this, job growth recently has slowed, business investment has softened, manufacturing output has declined and the world economy hasn’t kept up with the U.S. economy, limiting foreign demand for U.S. goods and services.
On the community and individual level, the benefit of the 10-year U.S. economic surge has bypassed many Americans. It has primarily boosted the largest metropolitan areas, Williams said, and the highly skilled workers who gravitate to those areas. Those who already were well-off got wealthier.
The Federal Reserve, he said, is focused on the U.S. economy rather than the many regional economies. But through its community development work, it can have regional impact. This includes research and outreach to give community leaders data and analysis they can use to better their local economy.
Williams took questions from the audience and, afterward, from reporters:
What impact does the surge of foreign investment have on the U.S. economy?
It’s a natural result of the United States having had such a strong rebound from the worst recession in living memory a decade ago, Williams said. “We’re in a global economy … What happens in China, what happens in South America or Europe directly affects financial conditions, stock market, bonds, the value of the dollar.”
Is the United States on a path to a recession?
There’s a lot of talk about the “R Word,” and understandably so, Williams said. “Right now, based on the data we have, the analysis we’ve done, I don’t personally see the risks of a recession in the U.S. in the near term as particularly elevated.” He added a caveat: Recessions usually spring from economic shocks or other unexpected causes.
Albany Mayor Kathy Sheehan asked how businesses can address the shortage of workers, which is a severe problem for some in her city.
Williams said the topic came up in every meeting he’s add in the Albany region this week. “I think I challenged a number of people around this — if businesses are struggling with getting the employees they need with the right skills, what are you doing about it?” There needs to be greater government-business-nonprofit-academic cooperation to better train workers, he said. “I think innovation and experimentation is an important part of it.”
What’s going to happen with the spiraling federal deficit?
The Federal Reserve doesn’t make tax and spending decisions, Williams said. That said, the U.S. securities that finance the national debt are the most important instrument in the world financial system, and the federal debt has a huge impact on the U.S. and world economies. “So, yes, I do worry,” he said. “I worry about the fact that we have an unsustainable path of deficits into the future, and these are concerns I’ve had for many years.”
How does your current region of oversight, New York, compare with your previous region, the West Coast?
Both have large metropolitan areas that are gateways to the nation, Williams said. But the West Coast doesn’t have the major regional cities like Buffalo and Rochester — “cities that were once really major industrial cities” — that were hollowed out by loss of jobs and population and now struggle not even to grow but just to stabilize.
Is the average American household better or worse prepared for the next recession than the last recession?
There’s a “complete lack of resiliency” on the part of a large share of the U.S. populace, due to debt, especially student debt, and lack of savings for emergency expenses. “I think that issue is just as true today as it was 10, 11 years ago. I think the only thing that’s a little better than 11 or 12 years ago is housing — mortgage debt relative to income has come down.”
Why has the strong economy and sustained job growth not translated into wage growth?
“A lot of the income has gone not to salaried and hourly workers but actually gone to what we call capital … profits to businesses. The piece of the pie of the economy that goes the worker is lower.” Further, he said, a much higher percentage of income goes to the few highest-paid workers, boosting income inequality.