Fed economist: Economy doing well

A Federal Reserve economist told people attending the inaugural Hi-Line Economic Summit that a recession doesn’t appear to be in sight, in fact, the last few years have been a time of growth for the U.S. economy.

“2013 was a record year,” Regional Economist Toby Madden of the Federal Reserve Bank of Minneapolis said during his keynote address Wednesday. “Yeah, yeah, right. You don’t believe me, do ya?”

“… You didn’t realize we were producing record year after record year? We’ve been winning the Super Bowl for the last two or three years?” he asked. “And it looks like — I might as well do the punch line now — for the outlook, were going to have another record year this year.”

Madden said the recovery and records set have not involved much job growth, and the improvements have been very selective by region and industry. But, he said, it has led to record levels of the U.S. gross domestic product in both 2013 and 2012.

But, he said, people don’t seem to realize it.

“Everywhere I go I hear the same thing. People are walking around like this,” he said, hanging his head.

“So, how was your date last night,” he asked in a mock conversation. “It didn’t go well,” his imaginary conversationalist said. “The economy, it’s the economy.”

At the same time, people don’t seem to expect a recession — they just expect the economy not to do well, he said.

Montana faring well

Montana had a comparatively high economic expansion during the early years of recovery, and weathered the recession of 2008-09 better than most states in the nation. Madden said Montana’s economic growth in 2012 was 2.1 percent, a little less than the national average.

“But Montana had been growing at a faster clip than the U.S. average for several years,” he said.

Part of that has been the strong numbers for agriculture, said Madden, adding jokes about farmers suffering broken backs from taking wheelbarrows full of money to the bank. A large part of that is the recovery from the drought early last decade, with plenty of moisture in recent years.

“Moisture is one of the key drivers of the economy here, I would say,” Madden told the audience.

He said another reason for the nation’s and this region’s strength is the oil development in the Bakken Formation in North Dakota and the northeastern edge of Montana. North Dakota saw the top rate of economic growth and the top rate of population growth in the nation last year, Madden said.

“It looks like that expansion, that boom, is going to continue for a while,” he said.

While the impact is less the farther away a community is from the active production, a spillover effect does occur, Madden said.

“It still impacts you,” he said.

A diverse recovery

Part of the reason people may not realize the U.S. economy is growing at a record rate is that the recovery is so diverse. If people are in a sector that is growing, in a geographic region that is growing or in a socioeconomic group that is experiencing more benefits, they may be more optimistic. People who are not may not realize the record-setting growth is occurring, Madden said.

Part of that is the spread on who is experiencing a growth in wealth, he added. A large part of that is what people think of as economic growth — employment.

“The United States isn’t in a job expansion. It’s still in a job recovery,” Madden said. “We’re almost there. … Maybe this month will show that, yes, we’re producing record numbers of jobs.”

He said it may be hard for people to understand how the output can go up to record levels while not producing record numbers of jobs.

“We’re more efficient, we’re more productive, we’re working harder and smarter,” he said. “We’ve got better technology. We increased our productivity.”

He also said economic expansion is usually led by home building, but home building did not lead the current expansion.

“It’s still very much in a recovery mode,” he said.

Some states also are in recovery mode, while others are experiencing growth, he said.

Changing jobs, wealth distribution

Madden also said the increased wealth in the nation is less spread out, with fewer people taking more of the growth.

The bottom quarter of U.S. residents actually have minus 3 percent of the nation’s wealth, owing more than they own, Madden said. The bottom half owns 3 percent, while the bottom three-quarters own about 13 percent of the wealth.

The bottom 99 percent own two-thirds of the wealth. The top one-tenth of one percent of U.S. residents own 20 percent of the nation’s wealth, he said.

At the same time, Madden said in response to a question from the audience, U.S. residents have a much better standard of living than even some of the wealthiest people in decades ago.

And part of the split of wealth and the diverse recovery is the new technology driving some of the expansion, he said, pointing to his smart phone and talking about three-dimensional printers. That is changing the economy, making new sales and eliminating sales of other products, and it didn’t exist a few decades ago.

He said studies show that many fields are likely to not exist as professions in decades to come, while new careers, some not even in existence now, may be dominant.

He said that is why he believes the focus in education needs to be teaching people how to learn, not how to perform tasks. The career for which a school trains a student now may not exist in a few years, and that student will need to learn new skills, Madden said.

Questions on debt, job relocation

When asked if his view was through “rose-colored glasses” when contrasted with the loss of relative income of the middle class and the growing federal debt, as well as the loss of jobs overseas, Madden stood by his comments, though he added, “there are concerns.”

As far as the national debt’s impact on the economy, the impact of debt depends on the debt, he said.

“In debt, it’s kind of hard to tell if it’s good or bad,” he said.

Borrowing money to go to school or to buy a more efficient tractor could help the individual’s economy. Borrowing money to buy another hit of methamphetamine would be bad debt, he said.

But, he said, it is true that the nation has debts that will be difficult to pay off without continued economic expansion.

As far as losing jobs overseas, Madden said the jobs aren’t really lost — those workers can take up better jobs in other sectors. If something can be produced better overseas, it is better to let American workers perform more productive jobs here.

He said a similar comment about income inequality. That can be a problem, but he said it is not yet.

“From an economic perspective, it doesn’t matter if I have 100 Ferraris and you have one Ferrari,” he said.

Until it reaches the point that a few people control so much that they can dictate prices, the inequality doesn’t matter from an economic perspective, he said, or when people can’t take care of themselves.

When the inequality reaches a point where a major sector can no longer feed, clothe and house themselves, then it becomes a problem, Madden said.

“Society is failing when it doesn’t teach its children how to learn,” he said.