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January 15, 2019

Boston Fed's Fuhrer sees modest growth for 'Goldilocks point' economy

Photo / Jim Neuger
Photo / Jim Neuger
From left, Jeffrey C. Fuhrer, executive vice president and senior policy adviser at the Federal Reserve Bank of Boston, leads a discussion with Mainebiz's featured panelists Tom Adams, founder and CEO, Maine Coast; Yellow Light Breen, president and CEO, Maine Development Foundation; Kelley Shimansky, chief HR officer, Tyler Technologies; and Beth Sturtevant, president, CCB Construction Services.

Jeffrey C. Fuhrer, executive vice president and senior policy adviser at the Federal Reserve Bank of Boston, said he sees U.S. economic growth continuing apace for the time being despite recent volatility in financial markets.

"Things are looking pretty good, the financial markets say something else — raising a risk profile a little bit," he said at the Mainebiz "Five on the Future" forum in Portland on Tuesday morning. "The bottom line is we see modest growth this year, probably enough to continue to see tightening labor markets."

Looking at growth, inflation and unemployment, Fuhrer characterized the economy as being in a sweet spot, or "Goldilocks point," right now, but added, "The question is where is it going?"

And while consumption is also strong, he said central bankers will keep an eye on financial markets, which sometimes but not always predict what will happen in the real economy.

The market "is not completely reliable, we will still watch it for sure, it's just not always easy to make sense of the signals," he said.

Among other things to worry about he pointed to slowing growth elsewhere in the world, particularly Europe, where the said the growth rate probably peaked last year, and in China, which "is decelerating for sure."

The Federal Open Market Committee raised interest rates four times last year, most recently in December when it lifted the federal funds target rate to a range of 2.25% to 2.5% — putting it at the highest level in a decade.

At that time it gave a median projection for GDP growth of 3.0% for 2018 and 2.3% for 2019.

Speaking to a room of more than 200 attendees on Tuesday, Fuhrer peppered his talk with anecdotes and humor, including a quick primer on "the inversion of the yield curve," which he said in a dramatically deep voice.

Following his keynote address, Fuhrer moderated a panel discussion with Tom Adams, CEO of Maine Coast, a lobster wholesaler based in York; Yellow Light Breen, president and CEO of the Maine Development Foundation; Kelley Shimansky, chief human resource officer at Tyler Technologies; and Beth Sturtevant, president of CCB Construction.

Business leaders on industry challenges

Setting the stage for a lively panel discussion on both challenges and bright spots, Fuhrer started by asking panelists what keeps them up at night.

Sturtevant pointed to workplace safety and workforce challenges, while Breen referenced a recent survey of Maine business leaders citing health care costs of their top concern — and access to high-speed broadband among the top four.

Offering a unique perspective as an industry heavily dependent on exports, Maine Coast's Adams said his business has been negatively impacted by high tariffs in China and in the European Union. He said that 30% of his company's revenue has been affected by disadvantages based on tariffs.

"What keeps me up at night is trade," he said. "Worldwide tariffs, worldwide economic policy, economic growth worldwide all keep me up at night."

On the plus side, Adams said that U.S. demand for seafood has been very strong, and that by being nimble his company has been able to sustain the same revenue as 2017 and 2016.

"Most of that was done by growing our sales in our existing markets," he said.

Tyler Technologies' Shimansky said she'd not seen anything yet to worry about in her business but later addressed the challenge of recruiting in spite of the intelligence, pragmatism and strong work ethic of young Mainers coming out of school.

"The talent here is great," she said. "I just wish there was more of it."

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