Full text of Annual Employment Conference : Center for Human Capital Studies : Business Feedback on Today's Labor Market : [Keynote speech before the] Conference on Employment and the Business Cycle : Speech Text

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SPEECHES

Business Feedback on Today's Labor Market
Dennis P. Lockhart
President and Chief Executive Officer
Federal Reserve Bank of Atlanta
Conference on Employment and the Business Cycle
Atlanta, Ga.
November 11, 2010
Key Points
• The Atlanta Fed systematically collects anecdotal information and opinion on questions of relevance to monetary policy by leveraging its network of business
contacts throughout the Southeast. Their business input is useful in fleshing out a real-time assessment of the economy and the labor market.
• Currently, when asked about their hiring intentions, businesses say they have capacity to cover near-term sales growth with existing workers and express caution
about increasing their workforce in the near future. This caution apparently reflects the uncertainty about future revenue growth and the lack of clarity about the cost
implications of various government policies.
• Many contacts confirm they used the recession to achieve leaner staffing and to reorganize for greater productivity. Although there are conflicting views on the
permanency of downsizing, on balance, a return to a prerecession configuration of a firm's labor force appears unlikely. Also, adjustments made by businesses in the
past few years have put a premium on certain job skills, such as versatility.
• It is very common to hear reports that businesses continue to pursue greater flexibility in their workforce arrangements in order to make labor a variable versus a fixed
cost, which may be a lasting or transitory trend.

~ Photo of Dennis

Good evening. I want to add my thanks to the presenters' and discussants' for your rigorous preparation for this conference.

Lockhart
This is the last formal event of your day. My task this evening is to make after-dinner remarks. Let me assure that I don't intend to compete with
conclusions drawn from the excellent research presented here earlier today.
Rather, I will try to complement today's and tomorrow's presentations with observations from Main Street on the country's employment picture and
the vexing problem of high unemployment. I must emphasize that the views I will express are my own and may not reflect the views of my
colleagues on the Federal Open Market Committee (FOMC) or within the Federal Reserve.
In addition to doing formal analysis of data, we here at the Atlanta Fed talk to a lot of people in the Southeast to get their take on the economic
questions of the moment. We classify this input as anecdotal , of course. Nonetheless, I give some weight to the anecdotal information we collect
from across the region. As a policymaker, I find this information useful in fleshing out a real-time assessment of the economic situation. And what I hear often challenges our
working assumptions. Tonight I will share some of these anecdotes to add a little yeast to today's and tomorrow's more studied assessments.
I will lay out for you what we've been asking recently and the responses we are hearing. I'll do so in three major categories---0bstacles to hiring, job skill issues, and possible
longer-term employer-employee trends.
Collection of anecdotal information
I should begin by explaining how we go about gathering this type of economic intelligence. All the regional Reserve Banks, including the Atlanta Fed , collect anecdotal
information from their business contacts.
More than two years ago the Atlanta Fed expanded this effort, launching an initiative called the Regional Economic Information Network, or REIN , to more fully leverage the
Atlanta Fed's large geographic footprint in order to widen the scope of our economic intelligence-gathering efforts.
We believe the scale and scope of our district justifies some extrapolation to the overall national economy. The six states of the Sixth Federal Reserve District together
represent about 13 percent of the national economy, and the industrial and employment composition of this region generally resembles the total U.S. economy.
The bank's Atlanta-based staff-along with regional executives who operate out of our five branches: Birmingham, Jacksonville, Miami , Nashville, and New Orleanssystematically collect current information and opinion on questions of relevance to monetary policy. Among many different types of groups, our staff regularly meet with the
top firms in the region to get their take on current business conditions and the outlook. Many of these firms have operations that are national and international in scope, so
what they tell us often offers a national perspective.
Also included in our network are our six boards of directors (one for the District as a whole and one for each of our branches) and an equal number of industry-specific
advisory councils. The industries include agriculture , trade and transportation , travel and tourism, real estate, energy, small and emerging business, and labor, education and
health. In addition , over the past year, we have conducted surveys of smaller firms to learn more about credit demand and availability, for example, on the part of small
businesses.
The input we've received from these regional sources has been particularly useful in shaping our Reserve Bank's view about the outlook for recovery over the past year. At a
high level , our outlook has been one of slow slog versus rapid recovery. The anecdotal input helped us avoid overreacting to the false momentum of the spring and what we
now interpret as a transitory slowdown over the summer.

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