Fed Speaker Says Economy Has 'Strong Baseline' with 'Uncertainty Unfolding'
Renee Haltom of the Federal Reserve Bank of Richmond told attendees of Lunch and Learn series the economy has a solid footing, but tariffs, inflation, consumer confidence could create turbulence.
By Martin Davis
EDITOR-IN-CHIEF
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Two counties in our readership area are among the 20 with the greatest share of civilian workers employed by the federal government — Stafford (20%) and King George (24%). That was one of the facts surfaced by Renee Haltom on Tuesday afternoon during the Lunch & Learn event put on by the Fredericksburg Regional Alliance.
Haltom, vice president of the Federal Reserve Bank of Richmond, told those in attendance that the Fed is closely watching “which geographies are most dependent on the federal workforce…. Even if the scale of federal layoffs is not substantial, there are some regions that might face pretty concentrated effects,” like Stafford and King George.
“We don’t want to overstate things,” she said, because the scale of the layoffs is still unknown.
She also didn’t want to overstate because the indicators coming into 2025 were generally positive for the economy.
Haltom said that the baseline numbers for the economy overall showed growth forecasts were above trend and had in fact been revised upward through 2024; labor scarcity had “normalized”; households were showing healthy balance sheets; inflation was approaching the Fed’s target of 2%; and post-election there was strong confidence in the business community that things were about the take-off.
However, uncertainties today are what have the Feds’ attention.
“There is a lot of uncertainty on polling right now in the economy,” Helton said. “We have seen some signs of inflation expectations picking up. Some of that is tied to tariffs, maybe some other things.”
She also noted that “we are seeing some signs that people are expecting inflation to move up.” In addition, she continued, “there is some risk to output from consumer sentiment, which has taken a negative turn.” In fact, the fall in the Consumer Confidence Index (Top left graph in photo below) took its steepest fall since August 2021, according the Haltom.
This matters because two-thirds of the U.S. economy is tied to consumer spending.
The real question, Haltom asked, is what will be the impact of all this uncertainty on the business community, which was feeling good about where the economy would head after the election.
She noted the role that tariffs, in particular, play into business concerns.
Pointing to results from the Fed’s December business survey, Haltom said that in response to the question, “What is your chief business concern?”, 15% of businesses listed “tariffs.” Tariffs, however, were not an option on survey — so participants had to provide that answer unprompted.
Business optimism, she concluded, is clearly tied to government policies.
Tariff policies turned sour this morning. The Trump Administration imposed tariffs of 25% today on Mexico and Canada, as well as an additional 10% tariffs on Chinese imports. Canada responded with 25% tariffs on “about $100 billion of U.S. imports,” according to the Wall Street Journal. China also imposed retaliatory tariffs, and Mexico is planning to retaliate as well.
Beyond Government
The actions of the business and government sectors are critical to our economy, of course, but so are their actions on the nonprofit sector.
The Advance shared with Haltom the disruptions that nonprofits in our community are experiencing due to federal government decisions to stop or slow the flow of funds. She responded that “we’re hearing the same thing.” And the result is growing need.
“I’ve heard that food bank demand was up 300% in the DC region,” she said. “Certainly,” she continued, “there’s a disproportionate effect on low- and moderate-income communities.”
However, she also noted that “one of the interesting things that I’ve seen communities do in response … is try to build networks” to explore how they can work together a bit more.
“What I think is going to happen is communities are starting to … deploy their COVID playbooks, where you had organizations that didn’t always talk every day coming together on zoom meetings to assess” what the situation on the ground is and where the funding gaps are.
In a Good Position - Sort of
For all the turmoil, Haltom said that “where we sit today, things look good…. There’s an air of uncertainty around [the year ahead] for sure, but I still hear a lot of optimism.”
Where the concern resides is with “the inflation side of the picture.”
Beyond the numbers, the Fed is also watching how communities respond, especially in areas likely to be affected by significant federal downsizing.
“We’re watching really closely and talking with people … to see how it’s affecting communities and also what communities are doing to receive those workers” and help them readjust to the new situation, Haltom said.
That statement reflects a point the Advance has made on several occasions. We may not be able to control what happens at the federal level, however, we can control how we respond to it.
Let the Fed Know
One of Haltom’s jobs is to hear in real-time from people on the ground how they feel the economy is going and how it’s affecting their businesses.
People can let the Fed know by filling out the monthly business survey.
CORRECTION: This article was updated March 6 at 9:00 AM to correct the spelling of Renee Haltom’s last name. The Advance regrets the error.
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I am not as optimistic as the speaker appears to be. People in our community are already seriously wounded by the actions of Trump and DOGE.