New York Fed: ‘Economy in a Good Place’

Federal Reserve Bank of New York president John Williams says the U.S. economy is in a “good place,” with inflation within striking distance of the Fed’s 2% goal, although the economic outlook remains uncertain.
“It will take some more time until we can achieve that on a sustained basis,” Williams told almost 500 attendees at CBIA’s 2025 Economic Summit + Outlook Jan. 15.
Williams discussed recent swings in the labor market, impacts to Connecticut’s economy, and key measures to watch for 2025.
He said the U.S. has seen robust growth in the labor force and in productivity, enabling the economy to expand at a faster pace than before the pandemic without creating inflationary pressures.
“Now that we’ve achieved that balance, our job really is to ensure that the risks remain in balance going forward,” Williams said.
Economic Outlook
Williams said he expects real GDP growth to slow to around 2% this year.
The U.S. Bureau of Economic Analysis’ third quarter report shows the national economy expanded 3.1% in the third quarter, while Connecticut’s GDP grew 3%.
He anticipates the national unemployment rate will remain around 4% to 4.25% throughout 2025.
Williams said the disinflation is underway, with demand for workers softening, adding that data will continue to drive Fed monetary policy.
“The economic outlook remains highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies,” Williams said.
“Our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals.”
With trade being such an important part of the economy, including in Connecticut, Williams said what happens in other parts of the world will impact the inflationary outlook.
He added that the implications for Connecticut’s $15.85 billion export sector will also depend on how other countries respond to Trump administration policies.
“Still, big monetary policy from my position, is in a very good place to manage these uncertainties, depending how they actually evolve,” Williams said.
Workforce
Williams spends quite a bit of time analyzing workforce data specific to Connecticut.
The Federal Reserve’s second district stretched from western Connecticut to New York, northern New Jersey, Puerto Rico, and the U.S. Virgin Islands.
While economic conditions for workers have mostly normalized in Connecticut, Williams said the pandemic created significant shifts in types of jobs workers hold in the state and in the region.
Office jobs that offer remote work are doing well, healthcare continues to boom, but sectors that rely on foot traffic have not rebounded from the pandemic as strongly.
“What we do need is a workforce that is not only prepared for the job to today, but is prepared to be successful is in the future.”
Williams
Looking ahead, Williams said investments in all types of jobs that will propel the economy is critical, including businesses working with K-12, two and four-year colleges, and trade schools.
“What we do need is a workforce that is not only prepared for the job to today, but is prepared to be successful is in the future,” he said.
He emphasized that the workforce will need to be skilled at the trades and prepared to use technology to be more productive.
“So we’re going to need a workforce that’s not only skilled at the trades, but is also prepared to use technology to make them more productive.
“I think the biggest challenge for our society in this context is we need to prepare our workforce to become more and more productive using AI.”
Supply and Demand
Connecticut had 73,000 job openings as of November 2024 and 56,900 unemployed people, a gap the state has not been able to close.
Williams said it’s an acute problem common in the Northeast, which has an aging population and other demographic shifts.
He said the region has great amenities, but attracting people can be difficult with hybrid work more prevalent.
It’s why housing affordability has been such a critical talking point across the region.
“This is the biggest issue in our country and in our region,” Williams said.
“If you’re trying to build your business and you’re trying to do that by attracting people into the region, housing affordability is the real key thing.”
Williams
“If you’re trying to build your business and you’re trying to do that by attracting people into the region, housing affordability, housing availability, along with the amenities and all that, this is the real key thing.”
Williams said demand for housing is strong, resulting in high prices. The question for employers and policymakers is “how do we increase the supply?”
He added that the New York Fed is working to get stakeholders together to solve problems related to housing.
“It’s about the leaders in the community, business, nonprofits, local government, getting together, rolling up their sleeves and making it happen,” Williams said.
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