Fed Listens: A Community Listening Session in Augusta, Georgia - July 16, 2019
- Fed Listens Events
Tuesday, July 16
The Federal Reserve's nationwide Fed Listens tour came to Augusta, Georgia, on July 16. Michelle Bowman, member of the Federal Reserve Board of Governors, and Raphael Bostic, president of the Federal Reserve Bank of Atlanta, heard local business and community leaders explain how monetary policy and macroeconomic conditions affect their daily lives and work.
The Fed Listens events series is part of a comprehensive public review of the strategy, tools, and communication practices the Federal Reserve uses to achieve its dual mandate of maximum employment and price stability. Fed officials are aiming to reach some conclusions about possible changes in the overall monetary policy framework by early 2020. They will communicate what they have learned next year, Bostic said.
The Fed Listens to Augusta
In Augusta, a three-person panel discussed what full employment looks like in the community. A second three-member panel explored the grassroots effects of monetary policy.
Below is a summary of the discussions, with questions Bowman and Bostic asked the panelists and questions the audience asked the panelists along with Bostic and Bowman.
Panel 1: Full Employment in Your Community
Randy Hatcher, president, MAU Workforce Solutions, an Augusta-based staffing and recruiting firm
Gia Hunter, director of human resources, Textron Specialized Vehicles, an Augusta-based manufacturer of golf carts, snowmobiles and industrial vehicles
Angela Pringle, superintendent, Richmond County School District
How is the economy working for your organization?
Hatcher said the Augusta area labor market is the tightest he's ever seen, with job openings far outnumbering qualified available workers.
"This is creating some interesting phenomena," Hatcher said.
An audience member asks a question of (l-r) Randy Hatcher, Gia Hunter, Angela Pringle, Raphael Bostic, and Michelle Bowman. Photo by Odie Swanegan
For one, employers are facing pressure to raise compensation. Much of that pressure has materialized only in the past 18 months, he noted, and so it is not yet reflected in official wage growth data. In general, deep-pocketed larger firms have benefited, in some cases by luring workers from smaller employers that can't match the salary offers, Hatcher said.
Yet even some larger companies are having trouble increasing salaries quickly enough to attract skilled people with numerous job options. "Employees can move just about wherever they want to move at any time they want to move," Hatcher said.
Hunter said Textron has increased wages and enhanced benefits in response to the tight labor market. For example, the company has instituted flexible work schedules, Hunter said.
The economic recovery has rejuvenated the Richmond County School District, according to Pringle. After a cumulative $188 million in budget cuts over 10 years, the school system last year finally returned to what officials consider full funding, she said. Its budget totaled $247.5 million in the fiscal year from July 1, 2018, to June 30, 2019.
During the year, rising local tax collections helped the district supplement teacher pay raises funded by the state of Georgia, Pringle said.
Describe the evolution from the Great Recession to now.
During the Great Recession, Hunter said, Textron did virtually no hiring and conducted numerous layoffs. Now, "I can't hire fast enough," she stated.
Richmond County schools struggled through the recession. For example, the system required teachers to take unpaid days off. Morale has improved after long-awaited pay increases, Pringle said.
Hatcher of MAU Workforce Solutions identified two stark contrasts between the recession and today's economy. First, there is a marked difference in mass layoffs. During the downturn, 95 percent of the firm's client companies, most of which are manufacturers, let workers go. He said MAU laid off half of its contract workforce and half of its full-time staff.
Second, he said that compared to 2009, most MAU clients now maintain a higher share of contract workers relative to full-time staff. "I think everyone's a little more cautious now," he said.
How are you recruiting and retaining employees? Are you competing with other employers?
Hunter said Textron is forming partnerships to help the firm find qualified workers. The company works with state training agencies along with the Richmond County School District on a novel program to help students who are at risk of dropping out learn manufacturing skills. Textron prefers to promote employees from within, in part because it costs more to hire externally. Hunter explained that hiring from outside often entails wooing someone from a place they like.
Pringle said the Richmond County School District is expanding its traditional recruiting territory beyond the Southeast, offering more flexible work arrangements such as four-day weeks, and working with local officials to help teachers acquire housing.
The system is using more agencies to train and recruit employees at all levels of the organization, she added. It has become difficult to find teachers, in part because many left the profession during the Great Recession and have hesitated to return.
Hatcher said MAU's clients are devising "all types of creative ways to retain people." They are reconfiguring shifts, as few job candidates today want to work Friday or Saturday nights, for instance. MAU allows one segment of its staff to work from home. That flexibility has allowed the company to attract people "who would never have worked for our company" before, Hatcher said.
There is debate among economists and policymakers about how "hot" to let the economy get. Do you see risks from a hot economy?
Hatcher said that MAU's clients, mostly large manufacturers, are maintaining high inventories of products to meet strong demand, and they face rising labor costs. If the economy suddenly slows, he wondered whether some companies would be stuck with bloated inventories and payrolls and be forced to make big layoffs.
For now, he said, he sees people changing jobs for an additional 50 cents an hour without notifying their employer. Meanwhile, salaried workers are leaving jobs for novel reasons—Hatcher cited one who quit to spend time in Peru. "People would never do that 20 years ago," Hatcher said. But now they are confident they can return and easily find employment. "That's kind of the danger in the hot market for employers."
Textron's Hunter said that while talent shortages can increase costs, a hot market can also help firms by forcing them to rethink their processes and practices and to focus on their real priorities.
Another positive stemming from the shallower pool of available workers is that it helps some people find work who historically were considered unemployable, Pringle said. The hot labor market, she added, is forcing employers and policymakers to think harder about lowering barriers to employment.
Is it easy for students and graduates to find jobs in this labor market?
Pringle said the school system has shifted from focusing on an "antiquated career path" to programs better suited to today's employers. For example, schools are trying to prepare students for more technology-based careers in engineering and aeronautics, she said.
If the economy slows, what will be the implications for the last people hired? Will they be the first out?
Textron's product line is diversified, so the company could probably shift focus to remain profitable if the economy slows, Hunter said. However, she said she worries that many shop floor workers are living paycheck to paycheck and therefore are vulnerable to an economic slowdown.
Hatcher said that in a downturn, the less-skilled (and thus lower-paid) workers would most likely feel the brunt of job reductions. Most companies, he added, would be unlikely to dismiss higher-skilled employees.
Pringle observed that if parents need to work multiple jobs, then they will spend less time with their kids. That detracts from student performance.
"When people are able to have a good wage and pay their bills and spend time with their children, it just makes for a better community and a better school system," Pringle remarked.
How does inflation affect your organization? How important is predictable inflation?
Construction costs are critical for the school system, Pringle said. Officials plan school building and renovation projects in five-year increments, she explained, so if costs rise more than expected, then the system might cancel some construction or renovation. Recently, building costs have risen but not dramatically, she said.
Textron decision-makers prize stable inflation, said Hunter. The company employs analysts to monitor markets for the firm's raw materials including rubber, copper, and lead.
It costs MAU Workforce Solutions 50 percent more to hire a person today than it did three years ago, according to Hatcher. That's because, rather than simply placing help-wanted ads and fielding resumes online, today's tight market means the company must pay staff to call prospective workers and visit prospects in person.
"That's been hard for us to sustain," he explained, because in many cases MAU is not charging clients more even as its costs increase.
Does the Fed do a good job of explaining inflation and why it is interested in inflation?
Hatcher said the Fed should consider streamlining its websites and simplifying information it produces.
The other two panelists largely agreed. Pringle said teachers are seeking practical material to interest students in financial literacy. Hunter added that while informed, engaged citizens likely grasp the Fed's work, many shop-floor workers and others don't understand how the central bank's actions affect their household budgets.
How would raising the minimum wage to $15 an hour affect employment?
Pringle said a $15 minimum wage would create challenges for the school system. In particular, a higher wage floor would mean raising the pay of school cafeteria workers. The federal funding that pays food service staff is insufficient to cover a $15 hourly wage, she said.
Textron's Hunter said she would like to see a hike in the minimum wage. However, she added that it could affect the company's finances.
Hatcher stated that he thinks private-sector companies are already increasing pay for the lowest-level workers and that a higher mandated minimum wage would hurt those employees.
Bostic cited a recent Congressional Budget Office report that estimated a $15 federal minimum wage would result in 17 million people receiving a significant pay raise and 1.2 million lost jobs. He said policymakers and the public must ultimately judge which side of that equation is more important.
Panel 2: Monetary Policy and the Economy: Beyond the Headlines
Jay Forrester, regional president, South State Bank
Ryan Hawk, executive director of business development and community outreach, Peach State Federal Credit Union
Hawthorne Welcher Jr., director of Augusta Housing and Community Development Department
How is the economy working?
Forrester described a "very strong" economy with uncertainties in some sectors. He noted that while most businesses are prospering, profit margins are beginning to narrow, and there might be bubbles emerging in industries including multi-family residential construction.
Hawk observed that confidence is high among most consumers and businesspeople, in contrast to pervasive gloom during the Great Recession.
Welcher pointed out that in low-income urban areas, many people are more concerned with daily challenges like paying their next power bill than with inflation and the state of the macro economy. Many low- and moderate-income Augusta residents, he added, also question why financial services are scarce in their neighborhoods even as property taxes increase because of redevelopment.Jay Forrester, Ryan Hawk, Hawthorne Welcher Jr., Raphael Bostic, and Michelle Bowman (l-r) discuss the grassroots effects of monetary policy. Photo by Odie Swanegan
Bostic interjected that it is indeed important to keep in mind that there are multiple economies, some prospering, others still struggling. He said he travels the Southeast often for a nuanced, ground-level view of how people are truly living, a view he emphasized he cannot get from data alone.
How would you compare today's economy to the Great Recession?
Welcher said compared to today, more funding flowed into the community development sphere amid stimulus efforts surrounding the recession. He lamented that it took a recession to focus public policymakers' attention broadly on community economic development.
Hawk sounded a similar note. He said that, regardless of macroeconomic conditions, Peach State Credit Union strives to educate its members about financial literacy, budgeting, and the basics of securing and keeping a job.
The banking industry is in far better shape than during the recession, Forrester stated. He said regulators' expectations are clearer, capital cushions to guard against bad loans are healthy, and loan quality is good. He added that lenders have not poured inordinate proportions of their loans into any one industry, in contrast to the heavy concentration in real estate before the Great Recession. At the same time, certain sectors including multifamily real estate are perhaps becoming overheated.
Is caution from the recession lingering and affecting spending, investment, and hiring decisions?
Peach State's business customers are more cautious now in spending, Hawk said. Forrester added that consumers are also much more careful about spending, especially on major purchases such as homes and cars, than they were before the recession.
Is the cost of credit or the availability of credit more of a challenge now?
All three panelists said the availability of credit is the bigger issue. Welcher and Hawk emphasized the importance of educating borrowers about financial basics and especially about the differences between traditional lenders such as banks and outlets such as title pawn and payday lenders in obtaining credit. Hawk noted that many potential borrowers mistakenly think they need an exceedingly high credit score to qualify for a loan from the credit union. "The knowledge of what's available at their fingertips is key," he said.
Are short-term or long-term interest rates more important to your customers?
Every panelist agreed that long-term rates generally are more important than are short-term rates. Commercial customers over the past 10 years have become far more likely to borrow for terms of seven years and more, Forrester said. Welcher noted that housing and community development hinge on 30-year mortgages and 20-year development bonds.
How do your customers think about inflation?
Answers to this question diverged. Welcher said many of his constituents don't understand inflation. Forrester said his bank's business customers say costs are rising for labor and materials and from regulation and tariffs. "It feels like it's starting to have an impact," Forrester said of inflation.
He's noticed that consumers and businesspeople seem to consider low interest rates and low inflation as a "new normal." In that context, he said, any uptick feels painful, even though inflation remains low by historical standards.
How well does the Fed explain inflation?
The key to reaching the broad public is clarity, the three panelists agreed. Forrester said that while there's plenty of information available from the Atlanta Fed and the Fed System, it's not always in plain language. He noted that many Fed officials and economists seem unable to explain the economy in laymen's terms.
Welcher noted that the most effective way to engage the public is through face-to-face outreach, such as the Fed Listens event.
Bostic responded that he would continue conversations like this. And Bowman said the session "has been incredibly enlightening for me."
What is being done to address intergenerational poverty?
(Note that this issue is at the core of economic mobility, one of the Atlanta Fed's major priorities.)
Forrester said helping individuals and families climb from the lower socioeconomic rungs is a critical, long-term concern. South State tries to partner with groups that focus on poverty, he said. Forrester added that educating parents and children about financial and economic literacy is important.
South State sponsors a mentoring program for girls who have not yet entered third grade, teaching basics about banking. Hawk mentioned Textron's partnership with the school system and the importance of involving the parents in such efforts.
Welcher said his agency aims to fill gaps unaddressed by other programs. All three emphasized the importance of a "holistic approach" that addresses numerous matters and not just job skills, for example.
What about future retirement finances amid the possibility of cuts in Social Security benefits and the fact that many Americans already face difficult financial straits? (She noted a Federal Reserve study showing that 40 percent of adults would be unable to pay a $400 emergency expense.)
Bostic responded that he and Atlanta Fed researchers are wrestling with the shape of the future labor force, and questions about when and how often people can retire. He noted that Americans on average are working much longer than they used to, in some cases because they can't afford to retire or they have to care financially for parents or grandchildren. At the same time, evolutions are happening in family structures, life expectancy, and other areas that influence the family balance sheet. Ultimately, Bostic said, the Fed must ponder what all this means for monetary policy, in particular for the maximum employment mandate and for economic stability and resilience.
Homeownership is generally the best basis for building wealth over a lifetime, Welcher said. Yet owning a home is not sufficient by itself, he added. Families need to know how to manage finances, pay a mortgage, and buy groceries. Moreover, small businesspeople need to know not just how to start a business but also how to sustain one.
Agenda 7:45 a.m. Check-in and networking 8:15 Welcome
Michael Shaffer, Executive Vice President, Strategic Partnerships and Economic Development, Augusta University
Raphael Bostic, President and Chief Executive Officer, Federal Reserve Bank of Atlanta
Michelle Bowman, Governor, Federal Reserve Board of Governors
8:30 Panel 1: Full Employment in Your Community
Michelle Bowman, Moderator
Randy Hatcher, President, MAU Workforce Solutions
Gia Hunter, Human Resources Director, Textron Specialized Vehicles
Angela Pringle, Superintendent, Richmond County School District
9:20 Panel 2: Monetary Policy and the Economy: Beyond the Headlines
Raphael Bostic, Moderator
Jay Forrester, Regional President, South State Bank
Ryan Hawk, Executive Director of Business Development and Community Outreach, Peach State Federal Credit Union
Hawthorne Welcher Jr., Director, Augusta Housing and Community Development Department
10:05 Closing remarks