GRAND RAPIDS, Mich. — The head of the Federal Bank in Chicago made a stop in Grand Rapids on Thursday, calling the region "the canary in the coal mine" when it comes to economic problems.
Federal Reserve Bank of Chicago President Austan Goolsbee spoke in front of business and economic leaders during an event hosted by Crain's Business Grand Rapids. He touched on how the U.S. economy is faring and how West Michigan's ecomonic performance is an early indicator of where the nation is headed.
"West Michigan's got a lot of strengths. It's the fastest growing part of the state," Goolsbee told FOX 17 during a one-on-one interview. "You got a particular focus on the healthcare economy, and that's been robust for a long time and is a strong expander. It's also got a pretty significant manufacturing presence and that's going to induce more business cycles. It's going to be more cyclical than a lot of parts of the country or even than the other parts of the Midwest."
"You've got an agricultural focus," continued Goolsbee. "The last year, year and a half in the ag economy have been a tough period because you're kind of getting squeezed. The sale price and farm incomes relatively flat, but the cost of inputs and materials rising, so that's where the squeeze is coming from."
"The unemployment rate in Michigan is high and the unemployment rate around Grand Rapids has been a bit high, over 5%."
WATCH: FOX 17 interviews Federal Reserve president from Chicago
When asked if that is indicative of trouble for the U.S. economy, Goolsbee said there are a lot of eyes on Michigan.
"It might be a representation of the canary in the coal mine nature of the manufacturing industry that it could portend difficulties in the national economy. So that's why people are paying a lot of attention on that on that front."
Federal Interest Rate
President Goolsbee said the U.S. economy was on track to meet the Fed's goal of low unemployment and low inflation this year before headwinds from tariffs threw a wrench in the progress.
"We had a little bit of dust in the air as we've had this uncertainty of what a tariff is going to do to prices and is it going to be lasting or is it going to be temporary," said Goolsbee. "I still think if we get the dust out of the air, maybe we're on that golden path, and that's why I was comfortable with, with voting to start cutting the rates, but I'm a little uneasy front-loading too many rate cuts at the beginning when inflation is still too high and if anything, it's rising."
Goolsbee referenced concerns from Grand Rapids business leaders that we could return to high interest rates like we saw in 2021 and 2022.
"In any rich country, they think the same thing that the central bank be independent of political interference when setting the interest rate," said Goolsbee. "And that's rooted not in theory, it's just rooted in the experience of countries. If you look at places where they don't have Fed independence, inflation is rising and high, and economic growth is worse. So I think it's really important that we maintain that and everybody basically recognizes that."
Slow job market, especially for new workers
In his speech, Goolsbee noted job seekers are having a tough time landing their next career, especially people just getting started in the market.
"I think you've seen, if not totally unprecedented, at least unusual environment that hiring is slow," Goolsbee told FOX 17. "If you look at the hiring rate, it's not high, but it's not because there are a lot of layoffs. It's just a low hiring, low firing kind of environment, and the unemployment rate is low and not rising very fast. So that's, that's been stable, but it's putting the squeeze on the new entrants to the labor force."
"So if you talk to anybody who's got college-age kids, you know it's not easy to get a job in this environment," continued Goolsbee. "What we don't know is that an indicator that the business cycle is turning and that's the beginning of recession, or is this just a feature of an AI kind of an environment where entry level talent is getting replaced with a new technology."
Number one economic takeaway
We asked Goolsbee what's the biggest topic to keep an eye on economically.
His answer? Inflation.
"It's taken us a long time to get inflation down, and it's still got more to go, and now it's going the wrong way," said Goolsbee. "So we should be worried if the inflation proves persistent coming from tariffs or other things."
Things to celebrate
Goolsbee emphasized the U.S. economy continues to show signs of strength.
"It's still a strong job market. The wage growth has been robust," said Goolsbee. "The unemployment rate is low, and our productivity has been remarkably strong, stronger than it was even before COVID. That might be coming in part from AI. It might be coming from hybrid work arrangements.
"We've kind of re-balanced the economy, but compared with other countries,the US remains a fairly strong situation and our growth rate hopefully will continue to be relatively high."
