Charles Davidson: Welcome to another Economy Matters podcast. I'm Charles Davidson, a staff writer with the Atlanta Fed's digital magazine, Economy Matters. I'm talking with Shari Bower, regional executive at the Atlanta Fed's Miami Branch, and Anoop Mishra, regional executive in the Birmingham Branch. Shari and Anoop lead their branches' Regional Economic Information Network teams (or REIN, as we call them, for R-E-I-N). Their job is to be out talking with business and community leaders about their day-to-day experiences in the economy, and then that intelligence is fed into the monetary policymaking process. This anecdotal information is really valuable because, for one, it's real-time—where the data is, by nature, backward-looking—and these stories bring important color and a human element to the statistics. So, Shari and Anoop—thanks for being here today.
Anoop Mishra: Thanks.
Shari Bower: Thanks.
The Atlanta Fed's Anoop Mishra and Shari Bower. Photo by David Fine
Davidson: Let me start with kind of a broad question: basically, since the pandemic hit US shores, we've had a lot of uncertainty, and general—for lack of a better term—weirdness in the macroeconomy, and it really continues today. So a lot of people wonder—and I'm sure you guys hear these questions constantly—are we headed for recession, or aren't we? If we are, is it going to be a shallow, short one, or is it going to be something worse? How does the information you all gather help to clarify those questions, or at least bring a little bit better context to what's been going on in a pretty uncertain economy?
Mishra: Well, Charles, thanks for having us here today. I'm glad we're having a chance to talk about this. You use the word "weirdness," and that's the very formal economic term that we use to describe what's going on here, too. A lot of the contacts that we talk to, they describe things pretty similarly. It's really strange to hear a business that, on the one hand, might say, "we're seeing some demand soften," and in the next breath say, "but we can't find people to staff our company." That is a dynamic that we don't hear very often. It's certainly been a very different time in our economy, I think, than we're probably used to. Towards that end, right now, for the most part our baseline forecast—and what we're seeing, what we're hearing—is not a recession. What we're hearing is, there's been a slowdown in growth. I think a lot of that slowdown is due to the fact that, for a lot of our contacts, 2021 and 2022 were just record years—probably outliers for a lot of them—just because of the pandemic and some of the dynamics that were going on. So even as some contacts are reporting that things were a little bit slower, we're not hearing a lot of concern or worry about overall outlook.
Davidson: Shari?
Bower: I think what Anoop said is true, but then we do see differences based on some sectors or regional differences, and I know we'll talk a little bit more about the regional differences later. But what's necessarily happening in commercial real estate in Chicago is not the same thing that's happening in South Florida, or in Nashville—and then just by industry and sector, too. In travel in South Florida, for example, we're hearing that there's some return to normal seasonal patterns. Furniture, we've heard there's a significant slowdown, and some businesses are still trying to meet pent-up demand—like with new cars, for example. One of my directors on my Miami Branch board of directors owns a big furniture company, and he pointed out if you need to cut back on spending, you can probably make do with that couch for another few months—do the "flip the cushion" trick—or you can lay on that mattress for another year. "But," he said, "you can't drive a couch to work."
Davidson: [laughs] You can't eat a couch for supper either, obviously.
Bower: That, too.
Davidson: So, in that vein—at any given time, whether we're beset by weirdness or not, there's I'm sure a million different questions that you guys could ask your contacts. But I wanted to ask you, how do you go about deciding what to ask them in a given time? Say, the banking turmoil that we experienced recently…do you and your peers, the other regional execs and the research economists, do you guys regularly huddle and decide on certain topics to ask about?
Bower: Absolutely—we do a lot of huddling. There are some themes that we typically always ask about. We'll always ask about demand and labor and access to capital and prices. But then what we do is after each Federal Open Market Committee meeting, we'll actually meet with the policy economists, and they'll give us a debrief from that meeting. And we'll hear what the questions are that are top of mind for [Atlanta Fed] President Raphael Bostic and also for the other policymakers at the FOMC meetings. And so, we'll formulate some special questions that we want to ask our contacts, depending on what's top of mind. So, as you mentioned, the banking crisis—this cycle, for example, we asked a lot of questions to our banking contacts about what they were seeing in terms of deposits and outflows, and we asked our business contacts what they were feeling in terms of credit tightening and their ability to access credit from the bank. So we certainly will customize the questions and tailor them based on the discussions that we're hearing the policymakers were having and where we might need to pull in a little bit more information from our contacts.
Mishra: Yes, and I think, generally speaking, if there were nothing specific going on in the economy, there are some standard things that we would always ask. We would always ask about demand, and we'd ask about capital investments and how that's going. We'd ask about things related to labor markets and inflation. So there are some standard questions that we are going to ask the contacts that we meet with, regardless of unique circumstances. But I think that really is a powerful tool, and we saw this—Shari mentioned the banking crisis. It so happens that the failure of Silicon Valley Bank really happened as we were here in Atlanta and we were meeting with our briefings, and so we knew that the next two or three or four weeks, there would be a lot of questions around this. And it was really important for us to understand how banks—as well as companies—were responding, in real time. So we really adjusted our questions in real time to be able to have immediate conversations with them, to get a sense of what was going on. Davidson: So when you're in the flow of an actual conversation, do you find there are points where it may take a turn that was a little unexpected, or they may mention, "Hey, my labor tightness, my tough time I've been having finding workers, is starting to ease," so you'll change course a little bit, in mid-conversation?
Mishra: Yes—and in fact, that's a great point. One of the things that I think we always tell the contacts that we meet with is that we're not coming in with a formal survey or a questionnaire. There aren't 30 boxes that we have to get checked. I think there's some real value in the survey work that we do and in the scientific methods. But this really is more of a conversation. And I think—Shari may have a perspective on this—I think some of the best intel that we get is, we can open up the conversation and really let it go where they feel like it's going to be most productive. Because there may be some things that are top of mind that aren't even really within the question set that we might normally go after. But it's really important for us to be able to adjust our questions and our follow-ups to what they're telling us. Bower: And I think you hit on something that really speaks to why the work that we do is so valuable and so unique: because we can ask follow-up questions. Obviously, the data is really important, and the survey work that we do is really important. But it can't take the place of having a conversation with somebody, because you can stop and ask them why, or you can dig into some questions—or they might raise something that you didn't think about asking them, that turns out is really important. We capture something in our work called "weak signals"—where maybe we're not hearing it across the board, but one industry or one contact raises something, and then we want to watch it. And sometimes those turn into things where we're getting early signals about a particular issue in the economy that maybe we wouldn't necessarily have seen if we had stuck to the script and we didn't allow contacts to talk to us about what's really top of mind for them.
Davidson: In a couple of minutes, I want to ask a little bit about how we kind of systematically put this information into the policymaking process, and why it's taken seriously. But for right now, we talked about how you want to stay topical, obviously, if there's something big happening out there. But, to what extent do you also shape the discussions around local economic circumstances? Shari, you're one of the many, many New Yorkers who have flocked to South Florida. That's a big part of the economy there.
Bower: I moved before the pandemic, Charles. I get very defensive about this. I tell people, "I was there already." [laughter] But yes. Davidson: Okay, fair enough. But seriously, obviously that's a profound part of the economic engine there. It drives up housing prices, fuels job creation, creates lots of good—and a few concerns as well, I'm sure. And then Birmingham, Anoop, is doing pretty well, I know, but a very different place, obviously, from Miami. I wanted to ask each of you to talk a little bit about just the fundamental character of the economies where you guys live and work and how you've seen the places evolve, and just a little bit on just what the big challenges are, and what the big opportunities are. Mishra: There certainly are a lot of differences across the Sixth District, and frankly, one of the things, I think, that makes the intel that we get here at the Atlanta Fed so great is, it's everything from the Miami economy to Birmingham, Nashville, New Orleans, and everything in between. In Alabama, one of the key growth areas of the economy has been advanced manufacturing. We've really seen the economy develop. If you think about a community like Huntsville that has really become a growth area for defense contractors, for professional services firms, and then you contrast that with Mobile, and the southern economy where the ports—and a number of manufacturers—have also gained a foothold—very, very different economies. I think one interesting contrast, especially in Alabama in the local area, is thinking about Mercedes, which is located in a small town called Vance, Alabama, about 30 miles from Tuscaloosa. Mercedes is one of the world's leading brands. The cars that they make in Vance, Alabama, go all over the world. And yet, 30 miles away from the Mercedes plant is the heart of the Black Belt, where you have a labor force participation rate that is below 40 percent, and you have some real economic struggles in what is primarily a rural area. And I think that really captures the different flavors, even within a small region of Alabama, that we need to make sure we get insights into.
Davidson: IYes, I grew up in Alabama, as you may know. It's striking to me—the textile industry used to be such a big part of things. My hometown had a Vanity Fair plant that closed in about 2000. It was the biggest employer, and then one day it's gone. And the same thing happened in a lot of the surrounding counties in that part of southwest Alabama. Shari, can you talk a little bit about South Florida?
Bower: Yes. We have something that we refer to as the "Florida discount." When we debrief on the things that we're hearing, sometimes I have to put on this filter, because things that are happening in South Florida—and Florida generally—are not necessarily reflective of what other parts of the country, or even the district, are experiencing. People have always flocked to Florida, and South Florida, specifically. This isn't a new thing, but it's certainly accelerated during the pandemic. And so we've seen a lot of migration to South Florida. People continue to come, and it's been great for businesses. Many of our businesses continue to do really well. Another member of the board of directors runs a large car dealership across Atlanta and South Florida, and she continues to do really well—better in the South Florida stores, because of all these people who are moving in. But that's not to say that there aren't challenges and struggles. There are lots of people in the area that are struggling. Affordable housing is something that I think comes up in every contact interview, whether you're a large company, a small company, a hospital system, a university. And so that's a big issue, as you talked about—housing prices—and affordable housing concerns are something that a lot of large urban centers are facing. But it's particularly pronounced in South Florida—partly because of the migration, partly because we're surrounded by water. And there's an inventory issue. There's only so much we can build out—we have to start building up. And so, there's certainly some unique challenges to the different areas that we serve here in the Sixth District. Things tend to be pretty sunny in South Florida. When the rest of the country is slowing, we feel it—but I think we feel it a little bit later than maybe other parts of the country, so we have to keep that in mind when we get together and look across some of the themes that we're hearing across the Sixth District.
Davidson: Yes, it is a fascinating mix. I know we often tout this idea that the Sixth District is pretty representative of the larger US economy. It's a good snapshot. Turning a little bit to the macroeconomic scene, we've heard for a long time—at least a couple of years—about a shortage of available workers. It's shown up in the data, the demand far exceeding the supply of labor, but it seems to be changing gradually. So, I wanted to ask: are your contacts seeing that? Are they having a little bit of an easier time filling job openings—and with quality workers, people they're comfortable with and happy to have on board?
Mishra: I think, generally speaking, Charles, the labor markets have gotten better than where they were six months or a year ago. That having been said, I think one of the surveys that we did here at the Atlanta Fed just very recently still had labor availability as the number one issue for contacts. And I know when I talk to contacts in my region, there are a couple of key themes that I hear. One is, overall, labor has gotten better for general labor positions, so if I'm in construction and I want to get a roofer or a framer or a general worker—that's much easier to get today than a year ago. However, if I want an electrician or a plumber or a skilled position, that's still incredibly difficult. In fact, I would say that that contrast has been even greater now than it's been in the last year, that general labor has gotten better but skilled positions are still difficult—and I think the same is true when you're thinking about professional services. One of the things that we've heard is that if you're looking for an accountant or an HR person, IT person, somebody that's in a traditional call center at a company—those are still really difficult to get quality positions to come in. Davidson: Are you hearing the same stuff, Shari?
Bower: The same thing. We actually just had a meeting of our Travel and Tourism Advisory Council last week, and that's one sector—hospitality—where they're still feeling that it's a tight labor market, and they're still challenged trying to find people to work, especially in the front of the house. So as Anoop said: generally, yes, but it does vary by sector. We have heard bits where people might have left during the pandemic to go take on other jobs, like real estate. Now they're moving back into the hospitality sector, so we're seeing some shifting there, but it's certainly still a struggle. And I will just do a little plug for our colleagues that run the Atlanta Fed's Center for Human Capital Studies. They actually have some great tools on their website. They have a wage growth tracker and a labor report that has some up-to-date data, so I would point folks to the website to look at some of the cool tools that we have up there that look at the labor market as well.
Davidson: Well, Shari, you have given me a perfect segue, because we're going to take a quick pause right now to hear about some of the other intriguing economic and policy information that we have on offer at atlantafed.org.
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Davidson: So, getting back to it, a really broad question—and you've touched on this already, but if you can sum it up relatively briefly: how are your contacts feeling about the next few months, next couple of years, in the economy?
Mishra: I would say there's a lot of uncertainty, and there's a lot of question as to what's going to happen in the next six months or so. But I think by and large—and some of this is dependent on sector—but by and large, most of our contacts, even those that are seeing some demand softening, there are very few that feel that the sky is falling. I think we're hearing a lot of "there may be some softening, but we're not anticipating huge declines or huge weaknesses in the economy right now." That having been said, I think that 2023 still seems like a pretty good year for a lot of contacts. But what they're really doing is, they're trying to recalibrate back to prepandemic levels. They said, "Hey, look, if we started 2023 right from 2019, we'd feel pretty good about things. If anything, some of the doubt and uncertainty really extends from the fact that we had two phenomenal years that we're coming off of—so, we know we're not going to be quite where we were in 2022, but we feel pretty comfortable with how things are shaping up for this year."
Davidson: So, do you guys ever hear much of a gap between what your contacts' views on the broad economy are, as opposed to their actual day-to-day experiences in their own organization? In other words, how often might you hear somebody lament the overall state of things—but then, five minutes later talk about how great their business is going, or vice versa? And when you do hear that, how do you treat that kind of information?
Bower: Yes, we definitely have to dig a little bit sometimes when we start speaking to our contacts—and again, it varies by region and industry. But as Anoop said, sometimes you'll hear, "Oh, we've seen a dip in sales—things are really declining." And now we have to ask, "As compared to what? Are you comparing off of these highs that you saw last year?" "Yes." "Well, what about compared to prepandemic?" "Oh, no, we're still doing great." And then I think some of it, too, is just influenced by what they're hearing on TV, what they're reading in the media and in social media. There's been a lot of talk, as you said, about recession and all this uncertainty, and everybody's worried about that. I think they do get impacted by that, and you have to dig a little bit, because they say, "Oh, I'm really worried—there's all this uncertainty, and I don't know what's going to happen." And then you ask, "Well, how are you doing?" "Oh, we're fine—we're doing great." So they're certainly influenced by what they're hearing about the broader economy, what they're hearing about what's happening in maybe other parts of the country, and that influences some of the answers that they give. And so that's why—when you dig a little deeper, again—there is certainly this difference between a business perspective and then this perspective on the broader economy.
Mishra: I would add, I had a few contacts talk about that their biggest worry is, does this become a self-fulfilling prophecy? That if we end up hearing this enough, do businesses start changing their behaviors because of what they're hearing? And then the change in behaviors itself might cause some further slowdown and may create a situation that really is not here to begin with.
Davidson: Yes, it builds on the notion of inflation expectations, which is apparently a huge determinant of what's actually going to happen with inflation—that seems pretty established. If we can, I wanted to ask you guys a little bit about the inner workings of REIN. To start with, how do you go about building a group of contacts that accurately reflects the makeup of both your area's economy—if that's indeed important in this pursuit—and the makeup of the larger macroeconomy? And when you bring on new folks, how do you go out and find someone and say, "Hey, do you want to talk to me once a month or so?" How does that work?
Bower: I think the pandemic really gave us an opportunity to think a little bit more strategically about the contacts that we speak to. We've actually had a project that we've been running for the last few years, to think about—how do we diversify our contact base and diversify across a number of different factors? So not just when you think of diversity across maybe gender and race, but also the areas that we're talking to—if I'm based in South Florida, I want to make sure that all my contacts aren't in Miami. I've also got to go up to Broward, and maybe West Palm, and the west coast of Florida, and the same across the other REIN branches. We have a pretty large geographical territory that we're responsible for, and we really want to make sure that we're hitting all of those areas. And then industries and sectors, too. Do I have too many banking contacts, and maybe not enough contacts in retail or manufacturing? We've been going through this process to take a look at: who are we speaking to? What does the rest of the country look like? Who are we missing? And really being more focused when we're doing our outreach, to try and fill some of those gaps—not just across our contacts, but also across our branch boards of directors and then also our advisory councils. Our boards, for example—for my board of directors in Miami, I have to pull from across South Florida, but I don't necessarily touch Birmingham. That's Anoop's board. For our advisory councils, because they're industry specific, I need to pull from across the whole district. So for my Travel and Tourism Advisory Council, I need to make sure I have representation from Birmingham, from New Orleans, from Nashville, from Atlanta—and the same thing for the Agricultural Council that they run out of Birmingham, or our Energy Advisory Council. It's really important to make sure that we're touching all the different facets of the economies that we serve.
Mishra: Yes, and I would add that I probably have a unique perspective on this in that before I came to the Fed, I was a REIN contact for my predecessor. So, I did this for a few years, and one of the things I think back to is that when I first had that meeting of, why would I be a REIN contact? It was because I happened to know my predecessor from a civic club that we were engaged in. And I think one of the things that's really stayed with me—and I think Shari and I and our colleagues, that we're very focused on—is, at the end of the day, we are parts of the community that we are working with. We go to the same places together. We have to be engaged in the community itself to develop REIN contact relationships. I think one of the things that I am constantly surprised by is that people really want to have a voice in what we're doing, and I think they are constantly surprised that the Fed is asking them to be a part—like, "What do you think?" I know from my perspective, at that time it was a relatively small company, and then I kept thinking, "Well, why would they want my input?" And then we'd have these conversations, and I think a lot of our contacts really appreciate that. If there is an opportunity for them to be able to engage with the Fed, and they understand that we're doing this in a way that we really want to have an influence on what's going on in policy, that they are, again, very enthusiastic about doing so.
Bower: And Anoop raises a good point. We also want to make sure that we're not just talking to the large corporations based in our areas, but we also want to talk to some of the smaller businesses, too. Because oftentimes the challenges that they're facing are very different, and we want to make sure that we have diversity in terms of not just the kinds of industries that we talk to, but the size of businesses that we talk to as well, so we can represent all of those different perspectives. And as Anoop said—I'm relatively new to the role still. I've only been a regional executive for about a year—I'm continuously surprised at people taking time, and these are oftentimes CEOs and presidents and CFOs of these companies, and they take time out of their day to sit down and to talk to us, and to share their insights with us. It's really helpful, and I just try and thank them and tell them how much we appreciate it. Because—and I know we're going to get into this in the next question, but—the information really does go somewhere. We spend a lot of time talking about the information that we've collected from our contacts and feeding it into the policymaking process. And so, it really is valuable—just for all those current contacts out there that may be listening to this, or potential future contacts. We really appreciate the perspectives that you're sharing with us. It's really important.
Mishra: That's a nice plug, Shari—great job. [laughter]
Davidson: Yes. Keep it coming, folks—keep the info coming. So yes, Shari—you sort of led into the next question here, which—I've been at the Bank for a while now. I'm hardly an economist myself, but I've worked with the economists quite a bit. And I know—and you guys obviously know this probably better than I do—but traditionally, they tend to be a little suspicious of anecdotal information. They like aggregate data: "I want data of what millions of people are doing, not what your buddy is doing down the street." But I know that over time—since REIN launched in, I believe '08, somewhere thereabouts—it's really grown. It's evolved. And our president, Raphael Bostic; our research director, Dave Altig; our other economists—they really take this seriously, and it truly does become an important part of this grist for making monetary policy. I wondered if you guys could talk a little bit about how that's happened, from your perspective. It must be gratifying.
Mishra: Yes, I think so. And the first thing that you mentioned is really the most important, which is—if this doesn't have the support of Raphael and Dave and the policy team, then really what we're doing is not going to have much of an impact. At the end of the day, we want to make sure that these are important stories that go into the deliberating process. I think what's really interesting is—and why the economists have been very supportive, and we've really worked well together—is the understanding that it's not an "either/or." It's not, "Do you support data, or anecdotes?" In fact, I think there's a recognition that the anecdotes and the discussions that we've had are really to better understand why we're seeing what we're seeing in the data. Because that might then be an indicator for, do we think some of this is going to continue? Sometimes you can look at the data and it tells you what happened last month or last quarter. But if you understand the rationale behind why business leaders are doing what they're doing—what their thought process is—you may then have a better opportunity to say, "I think that this is a trend that might continue in the next quarter, or in the next month, or the next six months."
Bower: To just give some concrete examples, we will hear early signals from our contacts—because, again, as Anoop said, the data is important, but oftentimes it's looking back. Anoop had heard this quote before. I just heard this last week, and I won't attribute it to anyone, because it's unclear if it was President Bostic that said it or our head of research—but making economic policy by solely looking at the data—and I won't quote this exactly, because I'm not going to get it right—it's like driving a car by only looking in your rear-view mirror. And so it's really important to get a sense from businesses: what are you doing right now, and what are your plans for the future? For example, I don't know if we're still banned from using the "t" word, but when folks were saying that supply-chain issues were transitory, we had been hearing from our contacts pretty early on that they did not think that that was the case—that they thought these were some structural issues that were probably going to stick around for a while. It's those kinds of examples that I think are really important to feed into the monetary policy process. And as Anoop said, the folks in the Atlanta Fed—the monetary policy team, President Bostic, our head of research—really find the information valuable. We have a discussion about it, we brief them about it, we work together with the policy economists, and the analysis and the information that we're collecting makes its way into the statement that President Bostic brings with him to Washington, DC to those Federal Open Market Committee meetings. As I said before, the information really does go somewhere. We don't just have these conversations and then forget about it. We have lengthy discussions about what we're hearing. We use that information to identify trends, and we do have direct access to feed that into the monetary policy process.
Davidson: Yes—very cool.
Mishra: Charles, one thing I wanted to add to what Shari said is that it's also really important that this is our full REIN team. This is not just the regional executives—it's our full REIN team as well as our policymaking team that we have. I think the key idea, though, is that this is a process that's continuing to evolve. We think that we're going to get better in the way that we're able to collect and synthesize these anecdotes. When Shari was talking about contact strategy, we want to make sure that we continue to evolve and optimize the people that we're talking to. How this process works is not something that we feel like we've just come to the end of the road, and this is it, and this is exactly how we're going to be doing this on an ongoing basis. And I think that's part of why the work that we're doing is really exciting, and it's a lot of fun—because we know it's going to continue to grow and get better over time.
Davidson: Yes, it's really fascinating. If I've learned one thing about economics working here, it's that it's this vast, gigantic system that no one's ever going to fully figure out, because it's constantly changing and it's made up of millions of people. And sometimes we do surprising, odd things. I'm a big baseball fan—Braves fan—and one thing, Anoop, you made the point of mixing the analytics and the anecdotes. It reminds me, baseball is very statistics driven, and the debate is pretty subtle, but it's—people tend to side "analytics" or the "old school scouting," but really a blend is the best way to address it.
Mishra: So, Charles, are you writing the sequel to Moneyball, called Monetary Ball? [laughter] Is that the next thing that's on your plate?
Davidson: I don't know—Michael Lewis may be listening to this, so we'll leave that aside for another day. But I think we'll leave it there. Anoop, Shari—thank you so much. It was really a fun conversation.
Bower: Thank you.
Mishra: Great, thanks.
Davidson: Thanks for listening, and please tune in for our next Economy Matters podcast.