Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Thank you, Mr. Chairman. Since this is my last meeting, I want to say formally what an honor it has been to serve under your leadership, at least for a short while, and under Chairman Greenspan’s leadership before that. And to my colleagues around the table and around the room, I want to say what an extraordinary experience it has been to work with you not only on policymaking but also on the other System business for so many years. There is a lot that I will miss, and your friendship is at the top of the list.

I will be mercifully short with my comments this morning. At our last meeting, I indicated that the data from around our District had finally begun to reflect the anecdotal reports of slowing that we’ve been getting for some months. The most recent data underscore that trend, but with some crosscurrents that suggest that some sectors continue to be reasonably solid.

With a total of forty-four directors in the six offices in our Atlanta District, we have an unusually large complement of regular month-to-month contacts who can often signal a significant shift in sentiment about what may lie ahead. Sometime ago we began to ask our directors each month to give us not only their views on specific economic issues but also their overall sense of the economic outlook. Very simply, we asked them to indicate whether they think six months out that growth will be stronger, about the same, or weaker. Over the past six months we have watched the aggregation of those views deteriorate to the point that, in our tabulation last week, the only directors who expected things six months out to be better were from New Orleans, where economic conditions can only get better.

Some of the uneasiness about the outlook in our region clearly reflects the sharp housing adjustment that we’ve seen, particularly in our once-hot coastal markets. That painful adjustment continues, with folks in the industry saying that they think the bottom may be as much as a year away. I talked just yesterday afternoon, before I left to come to Washington, with the CEO of one of the large national homebuilders headquartered in Atlanta. Mr. Chairman, I think he was in the group that came to see you and others just a few weeks ago. He emphasized that the adjustment that’s going on is broader and more significant than the data suggest. He said that sales cancellation rates, even in cities like Atlanta, now exceed 50 percent, whereas they had been running about 30 percent. He underscored something that we have talked about before, and it has been mentioned again this morning, that the fall in the real selling price is often masked by incentives and give-backs that have become very widespread. He said the only exception to the adjustment in housing that he could see was in the major Texas markets.

The stories out of New Orleans continue to be depressing, with business leaders now saying it may be a decade, rather than a few years, before the housing crisis there can be substantially resolved. There are simply not enough habitable housing units to accommodate the workers, especially low-skilled hospitality industry workers who are needed by businesses that are trying desperately to reopen and to get back on their feet. As a consequence, more and more jobs are being moved out to other cities, and many of them are not expected to return.

As I mentioned at the outset, there are also more-encouraging crosscurrents in our region. Manufacturing activity still looks reasonably solid; transportation and tourism do as well. We had some good employment gains in all our states last month, after some disappointing data the month before. We continue to get reports of shortages of skilled labor in a number of trades, including the construction industry. Despite continuing input price pressures, which others have talked about, we’re told that the ability to pass along those costs in final goods and services is still very limited for many businesses.

As far as the national economy is concerned, it’s my view that we’re about where we expected to be at this point, with no huge surprises since our last meeting. Evidence of slowing is now more apparent, but many crosscurrents also exist at the national level. Corporate profits are high, investment spending still seems to be reasonably strong, and consumer spending remains supportive of growth. While many sectors continue to perform reasonably well, as my regional remarks suggest, considerable uncertainty does exist about housing, both in terms of how steep the slowdown will be and what the slowdown might mean for consumer spending.

Although energy prices have clearly fallen back, inflation, as everyone has said, remains above our preferred range. We’ve had some encouraging monthly inflation data since our last meeting, but the hoped-for moderation in prices that we expected to see is still mostly a forecast. Still, I take some encouragement from the fact that the forecast for lower inflation readings over the period ahead is not only reflected in the Greenbook but also in the modeling work my own staff has done and in the projections of outside forecasters. Additionally, modest inflation expectations seem to be holding. And markets are not expecting us to deviate from our current policy stance, at least for the short run.

Finally, Mr. Chairman, I want to say to you and others that I’m counting on all of you to protect the buying power of my hard-earned retirement savings. [Laughter] I’m going to have lots more time as a retiree to be a Fed watcher and a letter writer, and I promise to be in touch if you don’t do a good job. [Laughter] Thank you very much.

Keyboard shortcuts

j previous speech k next speech