The presidents of the 12 Federal Reserve banks see the economy differently than the seven Federal Reserve governors and the big staff who work from Washington.
It's only natural. Their jobs are different. Fed bank presidents focus first on their districts, not the entire U.S.
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Consider Tom Barkin, president of the Federal Reserve Bank of Richmond. The bank's district covers most of West Virginia and all of Maryland, the District of Columbia, Virginia, North Carolina and South Carolina.
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For the most part, Barkin said in a Friday speech to the Maryland Bankers Association, the economies both in his district and the U.S. are in decent shape.
He expects more growth in 2025 overall, but he is concerned about inflation pressures that won't give up.
Why the economy has been so strong
The national economy did well in 2024 (and 2023 before it) because of some surprising conditions at work:
Consumer spending overall was consistent and strong. Already the U.S. economy has recovered from the health and economic shocks of the Covid-19 pandemic, he argued. The rebound was much stronger and faster than from a traditional economic recession.
The labor market was strong once the pandemic eased, and it still is. Employers, he reported, "don’t want to get caught short workers again. As a result, while cautious employers are allowing head count to drift downward through attrition and reduced hiring, they are slow to reduce staff."
Increasing price sensitivity. Consumers, in particular, "are trading down from beef to chicken, from sit-down restaurants to fast casual, from brand names to private labels. They’re waiting for promotions or moving to lower-priced outlets." Three big winners in that scenario, though Barkin didn't name names, would be Walmart (WMT) , Costco (COST) and, of course, Amazon.com (AMZN) .
Increasing productivity. Between 2010 and 2020, U.S. productivity ran at a 1.2% annualized rate. In the current decade, the rate has nearly doubled to 2.3%. That's partly due to investments in automation and more efficient processes, said the former McKinsey & Co. consultant. Plus, as labor markets have been less stretched, turnover rates have slowed, and experienced workers get more done than new hires.
Pressures could derail the progress
Barkin offered up an appealing scenario, one shared by Wall Street, large swaths of business owners and managers across the country and, of course, the incoming Trump administration.