"There's no reason we couldn't be as competitive with anybody in the country"

At the recent 2022 Economic Summit, Federal Reserve Bank of Minneapolis President and CEO Neel Kashkari sat down with Minnesota Chamber President and CEO Doug Loon to discuss Minnesota’s unique economy, and the challenges and opportunities faced by businesses in all industries.

Keynoting the event was a deep dive into both the Minnesota economy, and the American economy as a whole, with Neel Kashkari. 

“The U.S economy is sending us some wildly mixed signals that it's hard to make sense of exactly where the U.S. economy is,” said Kashkari. “We've all experienced very high inflation over the past year or so. That has surprised me and surprised many of my colleagues at how high the inflation has gotten. Ultimately, it's the Federal Reserve's job to keep inflation in check.”

How is the Federal Reserve working to tackle inflation? 

"We (the Federal Reserve) do not have the ability to increase supply, only you have the ability to increase supply, but we have the ability to restrain demand," said Kashkari. "We do that by tightening monetary policy and increasing interest rates. And so we are on that path to do that. We are all united in our commitment to getting inflation back down to our 2% target. It's an open question of how far we are going to have to go with interest rates to bring that demand down into balance." 

Along with the battle with inflation, the economy continues to change from the COVID-19 pandemic. Changes in work behavior, including the ability to work remotely, are having an impact on many businesses. 

Minnesota Chamber President and CEO Doug Loon (right) with Federal Reserve Bank of
Minneapolis President and CEO Neel Kashkari (left).
 

“If you're a restaurant owner down here in the North Loop and a lot of the workers are permanently working remotely, that's going to affect your business,” said Kashkari. “So I think that there are long-term effects of the pandemic and some of these changes. It's going be a while before we really see where the new normal is.”

The discussion also centered around a central issue hurting Minnesota businesses and its economy: the workforce shortage. 

"We need workers," said Loon. "What are the realities of where unemployment is and the labor force participation? Is there capacity there to be adding back workers at a time when we need them?"  

“As I travel around our region, the number one issue I hear from businesses large and small is the difficulty in finding workers; that's consistent everywhere I go,” said Kashkari.

One key to addressing some of the workforce shortage could be immigration reform, suggested Kashkari. 

“Immigration has been a vital source of workers in our economy,” he said. “Both low-skilled workers and high-skilled workers to meet our businesses' needs and our economy's needs. That has really dried up in the pandemic. We've got to address that if we really want our economy to be competitive going forward.”

Kashkari also pointed to a need to ensure the state is affordable to welcome new residents. This includes affordable housing as well as accessible child care. 

“Do we want to make this place affordable?,” said Kashkari. “If we really want to make it affordable, we'll have lots of people from the coast who say, 'Wow, this is a great place to live.' But if we don't want them to come, then let's continue putting up barriers to make it unaffordable.”

Kashkari said Minnesota is well-positioned to address these affordability issues and allow the state's economy to grow. 

"We've had a great engine of economic growth with all the businesses that are in this room, with the global businesses that are headquartered here and the spinoffs that they then generate as well," said Kashkari. "There's a great ecosystem here. The fundamental components are here. I think we now just need to address some of the issues that we're aware of. There's no reason we couldn't be as competitive with anybody in the country."

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