Although fears of another economic recession have been popping up lately, a St. Louis Federal Reserve official told a Springfield audience Aug. 21 signs are not pointing to one appearing this year.
Kevin Kliesen, a business economist and research officer at the Federal Reserve Bank of St. Louis, acknowledged recession risks have risen a bit this year. Still, he told the 430 attendees at the Springfield Area Chamber of Commerce’s annual Economic Outlook event that he isn’t expecting a recession anytime soon.
“The economy still looks good from a forecasting standpoint,” said Kliesen, in his keynote at University Plaza Hotel & Convention Center.
Despite the U.S.-China trade war and the Fed lowering interest rates for the first time since 2008, he sees economic health in strong consumer spending, solid labor market conditions and low inflation.
Retail sales rose 0.7% in July, following a 0.3% gain in June, according to the U.S. Commerce Department. In addition, the U.S. Bureau Labor of Statistics reported the national unemployment rate was at 3.7% in July, near the lowest rate in 50 years.
The labor market conditions index is still close to 1%, an indicator of above-average conditions, and Kliesen said it hasn’t been in the negative range since 2010.
“There’s now more job openings than number of unemployed in the country,” he said. “That suggests again the labor market is doing pretty well.”
A recession may not be in the offing this year, Kliesen said, but other economists aren’t as confident when looking toward 2020 and 2021.
The National Association of Business Economists did a survey this month of economists, and 72% of them predicted a recession either next year in 2021. That’s up slightly from February’s survey, which was at a combined 67% for the two years.
Inflation was below 2% for the seventh straight year, Kliesen said. Consumers and the financial market see it staying low, which he said is crucial to maintaining good economic health.
Some economists get worried that as the unemployment rate continues to fall, it puts continued upward pressure on wages, which then impacts prices. However, he said just because unemployment might fall, it doesn’t really say much about where inflation is heading.
“I’m not too worried about inflation, even if unemployment falls further,” he said.
That optimistic view struck a chord with Andrea Brady, retail banking regional manager with Great Southern Bank.
“I felt like it was really positive,” she said, noting the St. Louis economist provided a more level perspective on a potential recession than in recent media reports.
Ryan Mooney, the chamber’s senior vice president of economic development, offered a localized economic perspective at the event. He said Springfield Business Development Corp., the chamber’s economic development subsidiary, has generated 28 leads this year. That’s up from 23 at the same time a year ago.
“That’s certainly a positive sign that things are moving in the right direction,” he said of the leads, which are considered potential job creation projects with companies looking to expand.
On the other hand, he noted the leads have only led to one site visit, which is a big disconnect. Two site visits had been made at the same point in 2018.
“That’s something we continue to struggle with in economic development,” he said, pointing to current vacancy rates at 3.7% for industrial and 3.6% for offices as contributors. “Those are very, very low rates, and makes it a challenge.”
Great Southern’s Brady said she was glad to hear the leads are up but said the single site visit is unfortunate.
“We are such an amazing community – and it’s clear that we are – but more companies won’t come here,” she said. “It’s not only that they don’t come here, it’s that they won’t even look at us.”
To that end, business and civic leaders are collecting input for the city’s new comprehensive plan, called Forward SGF. A community kickoff for the plan was held Aug. 20, with a trio of community workshops set for Sept. 4-5, according to ForwardSGF.com.
The Economic Outlook event was organized by the SBDC. Next up in the chamber’s annual series is the 2019 Manufacturing Outlook, scheduled Dec. 6 at DoubleTree by Hilton.
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