Transcript of AJC interview with Atlanta Fed President Raphael Bostic

Raphael Bostic, the president and chief executive of the Atlanta Federal Reserve Bank, spoke at length with the AJC in a wide-ranging interview. The transcript of that conversation is below. Photo: Federal Reserve
Raphael Bostic, the president and chief executive of the Atlanta Federal Reserve Bank, spoke at length with the AJC in a wide-ranging interview. The transcript of that conversation is below. Photo: Federal Reserve

Where the economy goes — and at what pace — is partly up to the Federal Reserve.

The Fed and its 12 regional banks is one of the pre-eminent financial powers in the world. A semi-autonomous institution, it’s also a central bank whose decisions affect businesses and consumers every day, whether they know it or not.

When the Fed moves to raise interest rates, it changes what consumers pay on their credit card balances or to borrow money, as well as what businesses pay to borrow. The Fed’s decisions can also hit the brakes or gas on economic growth, outcomes that can help incumbent politicians look good, but can also undermine them.

For example, President Jimmy Carter’s unsuccessful bid for re-election was blamed at least partly on the soaring interest rates engineered by the Fed to quash inflation. President Donald Trump has at times been bitterly critical of the Fed’s rate-setting, especially in 2017 and 2018 when rates edged up modestly. But rates have been at record lows for the past year.

Raphael Bostic, the president and chief executive of the Atlanta Federal Reserve Bank, has been near the center of the storm for nearly four years. In a wide-ranging conversation last Thursday, he spoke to Michael Kanell, an economics writer for The Atlanta Journal-Constitution.

ExploreAtlanta Fed chief sees economic rebound with vaccine in summer

The transcript of the interview has been edited for clarity and length.

AJC: We finally have 2020 in the rearview mirror. And there are such high hopes for this year, yet we enter it with so much unemployment and current growth at something of a standstill. The Fed is often cited as having the largest collection of economists in the country, many of them working for you. So what’s the outlook?

BOSTIC: I think the progression of our economy will depend in large part on how the virus progression occurs through our community. I am monitoring that closely.

I am expecting that the vaccine or these vaccines will eventually get sufficiently distributed into the population and we will get to a more normalized approach to doing business. And when we get to that more normalized approach, I think the economy will respond pretty strongly and we’ll see a strong rebound.

Right now, my team and I, our models project that will start more robustly in the summertime. But again, a lot of that depends on how this virus gets distributed and so we are watching that extremely closely.

There’s a second piece to this, which is, we have a lot of families and businesses right now that are in a precarious position. And so, we also have been monitoring what kind of relief is out there and will be available to businesses. Because that is the other part to this, what recovery will look like depends largely on how much — the word I use is scarring, or more permanent damage happens to the economy.

And these relief packages are, to my mind, designed to minimize the amount of that scarring. And so to the extent that there is relief and people take advantage of that, the scarring will be less and the nature of the recovery will be a lot stronger.

AJC: What’s your read on Fed policy? You’ve been so aggressive about keeping rates low. But there’s speculation among the financial press about your letting rates rise as the economy recovers. Are we about to see that?

BOSTIC: I think our policy right now is in a good place. It’s well-positioned, people understand it, and it’s providing a lot of confidence about our view and our role.

If (the economy) comes back super-strong, it’s warranted to start having a conversation about how we get out of our more emergency position stance in terms of providing support and get back to a more normalized asset purchase stance and interest rate stance.

That conversation will happen over a longer period of time, but I think our experience has been that we should signal that we are talking about these things well before we’re planning on actually making the move. As I see evidence that the economy is coming back a bit stronger and we can pull back on the some of the stimulus that we’ve put into the economy, I am going to want to start having that conversation.

AJC: How long do you think that will be? What’s the time-frame you are thinking about?

BOSTIC: So much of this will depend on what the facts on the ground are when we get there. I am working really hard to keep an open mind on that.

I am fairly optimistic that the rebound is going to be fairly strong and I want people to understand that, if we see that strength, then the natural progression from that is to say, what’s our trajectory from that to move to a more neutral position.

I think my optimism is driving my willingness to talk about these things.

AJC: As you assess the situation, are there indicators that you follow, signals that you give the most weight to?

BOSTIC: I talk to a lot of business leaders about the economy and we also survey business people.

Those surveys give us a lot of tremendous information about what they are thinking in terms of investment, in terms of hiring and in terms of their expectations for sales. Those are all important measures for us because it is those expectations that govern how much they will spend.

The other thing we pay attention to closely — and you have to do this — is the patterns of consumer spending and whether you are seeing signs of confidence in the consumer space. Those also are the key signals when the broader economy is on the cusp of rebound.

The unemployment rate is also clearly going to be important.

AJC: Yesterday I was talking to someone who runs a staffing company. I often see temp work and staffing as something of an early sign of which way things are going. Anyhow, this guy said he had a load of business, that there was roaring demand for temps, but that the direct hire part of his business was not strong at all. Do you see staffing and temp work as a signal?

BOSTIC: We definitely look at that. That is an important signal of the confidence that business and business community has with how solid the economy is. And the demand for temp workers is up.

When I talk to those business leaders, what they tell me is that right now their expectation is that the demand for workers will not keep pace with the improvement in sales. So the recovery in employment will be weaker than the recovery in sales.

AJC: Why do you think that is?

BOSTIC: Right now, there is so much uncertainty — there has been so much uncertainty, they’ve just been reluctant to settle on any longer-term commitment until things get sorted out.

I’m hopeful that over the next couple weeks and months they’ll feel that things have sorted out so they’ll be more willing to make these more enduring investments.

AJC: That disconnect between hiring and sales. Do you think that is about automation taking jobs? Or is it really about the temps being a kind of halfway hiring? Or maybe there are sectoral differences, sectors like manufacturing using a lot of contract workers?

BOSTIC: I think the answer is all of the above. Some of it is automation. But for many industries, an automation is a significant investment and can’t be turned on with a switch. But I do know, and I’ve talked to a lot of those businesses, and they say, ‘This has got me thinking that this is the time to start making those investments.’ So I think you will see, down the road, more automation in some industries.

The temp piece is an important component to this. A lot of business leaders have seen these spikes in demand, because there’s so much swirl, they are not sure they are solid, they’re not sure they are going to endure.

That uncertainty is causing a reluctance to really, really commit, in terms of hiring workers and the like.

AJC: Uncertainty —

BOSTIC: If I had to give a word to describe economics for 2020, the word would have been uncertainty. Uncertainly about the virus and its progression, uncertainty about the labor markets. One thing I learned in Economics 101 is that business hates uncertainty. Everybody hates uncertainty.

That uncertainty just means that everything is going to happen with a little more caution. Our recovery is not going to look as robust.

I am hopeful that we are starting to see the resolution to some of this uncertainty so people will look forward and have some optimism and some confidence that now is a good time to commit.

AJC: You’ve talked about “scarring.” I think you are talking about damage and pain for real people. Can you tell me what you mean by that word? What does scarring look like for real people and real households?

BOSTIC: Well, I think it has a couple elements to it. The longer – and this is a well-known relationship – the longer that people are out of work, even on what’s ostensibly a temporary furlough, the lower the likelihood that they will get back to that work.

And so, to the extent this episode is expanded, that brings into the possibility that businesses will decide, it’s too long, it’s too much, I can’t continue to operate. So they shut down.

To me, that is the ultimate scarring because the distress they encountered wasn’t due to excessive risk-taking or any of those sorts of things, it was due to external events. But when that external event turns into an enduring loss of a business enterprise or a set of jobs or an extra shift, that’s a scar.

Just where the sources of job creation happen. You could see a kind of restructuring and reshuffling of these sectors, a consolidation or closures or rescaling. And that will also have implications.

People have been talking about these trends for a while. The existence of automation is not new. But what has happened through this pandemic is, it’s accelerated. That acceleration could catch people off-guard.

AJC: And for the households, for the people, you are saying the danger is long-term unemployment, evictions, foreclosures, credit issues...

BOSTIC: All of that. Exactly.

AJC: How worried are you that we are close to seeing Depression-level pain?

BOSTIC: This is really an unprecedented economic event and the approach that I’ve taken to this is to embrace the unprecedented nature of it and be committed to monitoring how the economy is performing and to be committed to being vocal and clear when I see signs of weakness that might warrant some support or relief.

AJC: That relief, from both Congress and the Fed...

BOSTIC: A lot of people ask, “Is this enough?” It’s hard to know because we’ve never been through anything like this before.

If we see that more relief is needed, we are going to let the policy-makers at state and local levels know and hope they find a way to provide relief to those sectors.

We are trying to understand what the status of families and households is and how close they might be to evictions or to running out of savings. We are also trying to understand where businesses are and how they are weathering this. If we hear from leaders that there are issues or challenges, I’ll make sure to let as many people know as possible so we can head off the possibility that scarring happens in that dimension.

AJC: Do you think that the actions of Congress and the Fed have in fact, prevented a Depression?

BOSTIC: I talk to a lot of practitioners and experts in the field and they were extremely worried. What we have seen though, is that American households and businesses have weathered this fairly well and been very judicious in how they’ve used the relief and strategic in that regard, and that’s been quite helpful.

There have been a number of studies and almost all of them I’ve seen show that prompt and vigorous action by the Congress and state and local governments — eviction moratorium, that sort of thing — all made a huge difference. And for those who say Congress can’t get anything done, they actually got something big done and it made a big difference. It really helped people get through that initial wave of pain.

AJC: And the recent bill, that the president finally signed at the end of December, that expires in March. And then what...

BOSTIC: No one knew how long this was going to last, so it was very difficult to know how long these provisions should last. People just had to guess. And so the notion that we have to revisit this on a regular basis is something, I think, that is built into this because of the nature of the experience.

The rollout of a vaccine on this scale — I’ve never lived this type of thing, so we are going to learn, how long this lasts, we’ll just have to be ready to react, to respond, as we learn things.

AJC: You’ve talked a lot about inequality and how — and this is something we’ve written about, too — that the pandemic has not only been uneven in its effects, but it has intensified the pre-existing conditions of inequality...

BOSTIC: This viral episode and how it has hit the economy has not been even across the board. There are particular sectors and particular types of jobs that are more at risk of being more permanently, more adversely impacted.

That is true and it has real implications for how people are experiencing this recovery and the reality is that the recovery is going to be uneven. People who work in the sectors that have been most hard hit are just going to be in a more precarious position.

The question about whether that becomes a permanent disadvantage really gets to the question of what our institutions can do to help people adapt to whatever new environment we end up with.

That’s one reason why our bank, why we have a Center for Workforce and Economic Opportunity, because I think that a big element of adjustment will be helping workers understand what skills are going to be needed for the jobs of tomorrow and then, making sure we have institutions that are around and primed to provide workers with instructions on how to get those skills.

We talk a lot about inequality. To keep people mindful of the idea that impacts are not being born evenly and that we need to just remember that those...the way this episode has played out, those who are in the most precarious positions are turning out to be the most exposed.

That does happen to some extent in recessions, but this one has been even more extreme. So we need to make sure that, as we see certain parts recover, that we don’t forget that there are a whole bunch of other experiences out there.

If that portion of the recovery doesn’t play out well, we’ll have a drag on economic performance.

AJC: What do you make of the worries that there’s a mismatch between the kinds of skills that jobless people have and the kinds of skills that are in demand? And the fear that the longer the recovery takes, the larger that mismatch will be?

BOSTIC: Well, that’s a concern. That is why we are working so hard around issues of workforce development. I would characterize the jobs becoming available — there are at least two types of them. There’s one type that requires a high degree of training and background technical skills, the engineers and that kind of stuff, programmers...

But there are a whole host of others that may not (require that training). There’s one thing that’s important for all of us...Where there are some jobs that provide really good wages but don’t require five, seven years of training. We call them ‘opportunity occupations.’ These types of jobs do exist...

We created on our web site an Opportunity Occupation Monitor which shows something about the mix of jobs.

It’s my sense that people get locked into what they do and think that the lift to do something else to have a long-term positive career prospect is always super heavy. I don’t think that’s true. And the more that we can make that clear to people — that there are options, even in a world where there’s so much disruption and uncertainty — I think that can be very helpful.

AJC: And the pace of the recovery? Isn’t a slower recovery so much worse for those people who have lost jobs?

BOSTIC: The longer we have people that have to bridge, or be on a bridge, and getting relief as opposed to looking forward, the more risk we have that this recovery will not be as robust as it would be otherwise.

This is where the progression of the virus becomes very important. Because in many regards, that will determine how robustly the economy can recover. I am going to watch that closely and make sure that I understand what’s happening there, because that will play a huge role.

AJC: And that center... can you talk a little about that?

BOSTIC: The Center for Workforce and Economic Opportunity...The basic idea, the premise is that there are a lot people who may not be aware of those jobs that don’t require years of training. We want people to know where to turn.

There are community colleges, technical colleges and the like that are offering the training programs — short-term training programs that will allow people to get those skills and get those jobs.

There are two partnerships that I want to call out: One is the Rework America Alliance with the Markle Foundation and National Urban League.

The second is with the U.S. Chamber of Commerce. We are trying to create a capacity for mid-sized companies to train people to get into higher-echelon jobs.

AJC: Now, you have been one of the more vocal proponents of diversity in the workplace, of inclusion of all manner of people into the work force. And that received a lot of attention during the summer during the protests...And now it’s six months later. What do you think? Has there been sufficient progress? What is your perspective?

BOSTIC: I think this is a work in progress.

Progress on these issues is like a marathon. What we have to be ready for is a long engagement. These issues didn’t come up in a day or two, it took generations to get here. It’s going to take a while to make large, measurable progress on this.

One thing that has really encouraged me is that the issue has not really receded from the minds of business leaders across this nation. Those leaders are still very focused on this. They understand they have a role to play in leading change.

I’ve heard conversations about developing a pledge, that every business has an opportunity to sign on for. Those kinds of things are positive and they are new.

My hope is that in the next six months or so we’ll start to see those things roll out. Then the positive change that I’ve seen becomes more visible.

AJC: As you know there’s some pushback. Not everyone thinks that the call for inclusion or equality is in their interest. For some people, it feels like they are being slighted. There’s been a lot written about white workers, blue-collar people who feel they’ve gotten a raw deal from globalization and there is an overlap with racial issues and racial resentment. So what do you say to some blue-collar white worker who says, “Yeah, I see what they’re doing for so-and-so, but they’re not doing it for me”?

BOSTIC: I’d say that’s just wrong.

We are actually doing it for everybody. Our goal is to have this economy work for everyone. That blue-collar worker, who feels stuck and doesn’t have an opportunity, this economy is not working for them either. I am convinced that the things we are doing will work for them as well, because it will lead to different kind of creativity and an attention by business leaders about the kinds of opportunities they are creating and the things that become available will become available for everyone.

So I actually think that by increasing the focus and attention on these things, it really does give everybody an opportunity to have a step up and a different experience and a different potential for growth and prosperity.

AJC: But you know there’s resistance to what you’re saying...

BOSTIC: I know that there is — in general — a fear that there is a fixed pie. That if someone else gets something, then I don’t.

That fear is real and it’s out there. I think the fear is misplaced, because if we are able to achieve prosperity, the pie can actually get bigger and that’s what we need to strive for. This isn’t a zero-sum game.

If we get more people engaged, we’ll get more ideas, more innovation, we’ll get greater demand and the capacity of the economy will actually expand and everyone will be better off.

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