DS News

22 The Exchange William R. Emmons is the lead economist with the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, where he also serves as AVP. His areas of focus at the Center include household balance sheets and their relationship to the broader economy. He also speaks and writes frequently on banking, financial markets, financial regulation, housing, the economy, and other topics. His work has been highlighted in major publications including e New York Times, e Wall Street Journal, and American Banker, and he has appeared on PBS NewsHour, Bloomberg News, and other national programs. Emmons received a Ph.D. in finance from the J.L. Kellogg Graduate School of Management at Northwestern University. He received his bachelor's and master's degrees from the University of Illinois at Urbana- Champaign. DS News spoke to Emmons about recession threats and economic policy, as well as racial disparities in housing, slow population growth, and the implications of the falling default rate nationwide. Where is the threat level for a recession now? Let me start by saying these are my own views. e Fed cut interest rates, and that's a concern. Also, the Fed cut rates 75 basis points last year. at indicates some concern. e yield curve has been inverted a chunk of last year. Depending on exactly which measure you look at, it inverted again this year. [President of the Federal Reserve Bank of St. Louis] Jim Bullard has pointed to that as a very important recession indicator. Another index that is informative is the Chicago Fed index, which shows that the economy is probably not in recession as of January. It is at a level that could be close if you go back and look at previous recessions. As long as the job market stays strong and unemployment stays low, we can probably power through without a recession. I would say there are so many straws in the wind right now. is is classic stall speed, tipping point sort of territory right now. e New York Fed, for example, has a model that is based largely on the slope of the yield curve, and they were showing elevated recession probabilities. I think they were pointing toward the middle of 2020 but that was before the virus. So, where's the threat level? I would say high. How is the population growth slowdown impacting housing? As the population growth slows and there are fewer young people, it trickles through in all sorts of different ways. Way down the road, fewer people are entering the job market, and so those things are slower to develop. is deceleration in population growth is unusual because it's probably the lowest population growth in peacetime ever. Economists who are looking at demography point to periods of really stressful economic conditions like the Great Depression or a war—that's when you would expect to see both slowdowns in birth rates and in immigration, but we're seeing it now when there is no Great Depression. Maybe by 2020, we'll see some recession conditions. e point is that both the slowing birth rate and slowing immigration are indicative of some kind of adverse trends about young people not being as optimistic. Foreign potential immigrants are also not as welcome or not as optimistic about coming here as they might've been in the past. How solid has the housing market's recovery become in recent years? I would characterize the housing recovery as mixed. Demand is pretty good. A big "As the population growth slows and there are fewer young people, it trickles through in all sorts of different ways. Way down the road, fewer people are entering the job market, and so those things are slower to develop." William R. Emmons Economist and AVP, Federal Reserve Bank of St. Louis Get to Know Industry Executives Beyond the Boardroom

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