Will metro Atlanta be able to narrow the gap between its above-average unemployment rate and the nation’s anytime soon?
Is persistent inflation about to raise its ugly head, fueled by gas prices?
Are we headed for another recession or serious slowdown?
No — on all counts. That’s what Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told me when I sat down with him last week.
“Atlanta continues to recover at a pace slightly lagging the national economy,” said Lockhart, who has headed the Fed’s six-state southeastern region for the last four years. “We haven’t discovered oil under Atlanta that creates a … driver that’s unconnected with the broader economy.”
So like the nation, Atlanta is stuck with slogging through this economy, making “gradual” improvements over the next few years, Lockhart said. But Atlanta has a steeper climb, since its jobless rate is 9.8 percent, while the nation’s is 9 percent.
Why is that, Mr. Lockhart?
In a nutshell, he said, what drove the metro economy over the past few decades — millions of people moving here to buy homes, take out mortgages and construction loans, occupy office buildings and fuel retail — came to an end when the financial crisis hit. Miscalculations that the good times would keep rolling caused excessive lending and overbuilding, which aggravated the problem.
Turning to inflation, Lockhart, 64, said he knows rising gas prices have alarmed people. They’ve also caused him to look at key price data every day to determine whether fuel price increases will lead to “broad-based, persistent inflation.”
What data does he look at?
The Atlanta Fed’s “sticky price” index, of course.
To determine whether volatile energy and food prices are driving lots of other goods and services higher, he looks at items whose prices only move periodically. They include the price of a home pest-control contract, cable TV services and laundromat costs. His conclusion — overall price pressures are “fleeting.”
If inflation will not be a major issue, how about a third round for the Fed to buy government bonds, called “quantitative easing,” to continue stimulating the economy when the second round ends next month?
Lockhart did not think that was in the cards, adding that “solid private sector strength is developing.”
Still, he believes it will take another three years just to get back to the pre-recession employment levels of 2007. And he does not subscribe to the Wall Street vs. Main Street view of what’s been happening.
“I don’t see this is as a question of two worlds — one as the adversary of the other,” he said. “They’re very much tied together.”
With all due respect, I disagree. They may be tied together, but they’ve been pulled in opposite directions.
Wall Street, big company bottom lines and CEO paychecks seem to be doing fine. Many on Main Street, smaller companies, middle-class workers, the unemployed, those who’ve lost their homes or struggling to keep them — not so fine.
In my mind, it has been a question of two worlds. The government, including the Fed, did a lot more to protect the big fish than the little ones.
- Henry Unger, The Biz Beat
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