By some measures, the United States' economy is in great shape. President Donald Trump touts record low unemployment as evidence that things have never been better. His argument is bolstered by historic stock market increasesover the last year.
And if Esther George has one word to describe her 2020 economic outlook, it would be "positive."
George is the president and CEO of the Kansas City Federal Reserve Bank, helping to lead this region's office of an institution tasked with keeping the country’s financial system "more safe, flexible and stable." The Federal Reserve Bank buys and sells government debt, manipulates the interest rate banks pay for short-term loans, and makes sure those banks hold onto a certain amount of their deposits in cash.
Born in St. Joseph, George grew up on a farm in Faucett, Missouri, and graduated from Missouri Western State University before earning a master’s in business administration from the University of Missouri-Kansas City.
And as one of the country's leading financial supervisors, she knows that even when the overall outlook is "positive," the situation is actually more nuanced.
"Even though the macro economy's growing — things may look good at that level — we have segments of our population that struggle with wage income, the price of housing, the price of health care, the price of education," George said.
Those kinds of mixed signals can make pulling the trigger on a new home or car a little terrifying for people who aren't trained to think about the economy like George is.
Making reliable financial predictions depends on having the right data, but numbers mostly look backward, at things that already happened. That's why, George explained, "you're also trying to understand how people are making decisions today, and in what context the economy could be turning."
There are two big reasons she thinks economy is destined to grow.
The first is somewhat predictable, considering the Federal Reserve is specifically assigned to focus on unemployment and inflation: It's that record-low employment the president is so fond of bringing up.
"It's been one of the most positive things in this 11-year expansion, is that we see more people coming into the workforce now," George said. "That does support households, gives them an opportunity to begin to establish themselves."
Second, a revised North American Free Trade Agreement with Canada and Mexico, and an initial trade deal with China, will help remove some uncertainty in international trade markets.
George says it's still too soon to know how big an impact these accords will have, "but I think on net it has been very positive for people to know that's been resolved as it relates to those particular trade deals."
George is also keeping her eye on several potential problem areas, including the coronavirus, which first appeared late last year in Wuhan, China. She said in a time when global growth was stabilizing, the disease could reintroduce unease.
"So you think about the announcements we've seen in the press of factories shutting down, of travel being suspended," she said. "That means people aren't out spending. It means that businesses are not getting their products out the door in the way they were."
How long those conditions persist is anybody's guess, said George.
Businesses in the United States are also spending less, as a whole, and borrowing more.
"We see record-high levels of business borrowing, and particularly in categories of riskier lending," she said. That's largely as a consequence of very low interest rates, which encourage people to take more risk. Under the right circumstances, that corporate debt could accelerate a downturn like the financial crisis of 2007-'08.
When the global economy slows, so does demand for American goods, George said. And low oil prices, which are a boon for people filling up their gas tanks, translate to businesses making fewer investments in the energy sector. Growth in oil-producing states like Oklahoma and Wyoming could take a hit.
Despite movement on particular trade deals, tariffs are still making things harder than they need to be.
"We saw right away that in the farm sector, soybean tariffs were having an effect on farmers who were already struggling with low farm incomes" and low crop prices, she noted.
Financial aid to farmers from the federal government jumped to its highest level in 14 years, but did not entirely make up for lost ground. And that tariff tension spills over, too, said George.
"When businesses and household become uncertain about how (a tariff) affects them, they will tend to wait before they spend," she said. "So it has broad effects."
Last but certainly not least are those low interest rates. A handy tool for boosting a flagging economy, lower interest rates mean lower borrowing costs and eventually more consumer spending. But with rates already between 1.5% and 1.75%, George said financial policymakers don't have a lot of room to lower those rates even further if the economy worsens.
Except for 12 months in 2018 and 2019, the effective federal fund rate has been below 2% since September 2008, according to the Federal Reserve System.
"Making sure that you use that monetary policy tool when you need to is clearly important, and we know that we won't have that kind of capacity going forward," she said. "We have typically had up to twice as much power to reduce rates."
But these are areas of potential problems, she said — things that haven't happened yet.
For now, she said, "I think the outlook from my colleagues and I are generally positive, to say as long as people have jobs and are spending, we should be in good shape. By all measures the American public is doing pretty well."
Esther George spoke with Steve Kraske on a recent episode of KCUR's Up To Date. Listen to their entire conversation here.
Luke X. Martin is associate producer of KCUR's Up to Date. Contact him at luke@kcur.org or on Twitter, @lukexmartin.
