Outlook for the US and Alaskan economies

Good morning, Anchorage. It is a pleasure to be here today presenting my perspective on the economic outlook for the United States and Alaska. I have dedicated my professional life to studying and analyzing data, and my role as a Federal Reserve economist affords me access to the most current information available. However, I recognize that true insights can only be gained through real-world interactions with those directly affected by monetary policy decisions.

Today, I will share my view of the U.S. economy as a whole and then delve more deeply into the specifics of Alaska's economic situation. Finally, I would like to discuss the importance of consumer sentiment data in understanding the overall health of the economy.

First and foremost, I believe the U.S. economy is on a resilient and solid growth trajectory. Inflation remains a persistent issue, having consistently exceeded the Federal Open Market Committee's 2% target for more than half a decade. Despite recent modest improvements, I remain firmly convinced that inflation levels are too high. In the latest data available, the personal consumption expenditures price index increased by 3.7% over the past year, surpassing our target by nearly 100%.

While the energy crisis in the Middle East has played a significant role in driving up energy prices, it is essential to recognize that inflation is the result of a confluence of factors. Core prices, which exclude the volatile food and energy components, have also risen by 3.3% over the same period. The rapid expansion of capital spending on artificial intelligence infrastructure is another notable contributor to rising prices.

On the employment front, the labor market has maintained its stability and resilience over the past year. The unemployment rate stands at 4.2%, barely shifting from a year earlier, aligning with many economists' expectations of the natural rate of unemployment. Job growth has been modest, averaging more than 100,000 new jobs per month in the April through June period.

However, the low hiring rate is a cause for concern, particularly for certain groups such as new entrants, who may face increased difficulty finding employment due to pandemic-era overhiring and longer-term structural shifts.

Despite these challenges, many workers remain optimistic about the future. While the prospect of artificial intelligence replacing certain jobs has raised concerns, the direst predictions have yet to materialize. Thus far, the most significant risk to the labor market remains uncertain and has not worsened over the past year. Overall, U.S. economic growth has remained robust this year, with adjusted output growing at a 1.8% pace through the first half of the year and on track to accelerate in the second half.

Business investment has been a key driver of this growth, with overall business investment rising at a 10% annual rate in the first half of the year.

Now, let us turn our attention to Alaska's economy. The data suggest a mixed picture. On the one hand, consumer spending has advanced at close to a 2% rate in the first half of the year, indicating a resilient consumer base. However, housing remains a soft spot, with residential investment edging down by about 3%. On the other hand, business investment has remained robust, with overall business investment rising at a 10% annual rate in the first half of the year.

In light of these findings, my assessment of the economic outlook for the United States and Alaska is clear: inflation remains too high, and the risks to the inflation side of our dual mandate are currently higher than those to the employment side. As such, I am prepared to act by raising interest rates if necessary to bring inflation back under control.

While some disinflationary forces are already in play, such as the winding down of tariffs and the potential for energy prices to normalize, these forces alone may not be sufficient to achieve our inflation target without additional policy action.

In conclusion, while the U.S. and Alaska economies face significant challenges, there is reason for optimism. By addressing the high inflation and maintaining a focus on the labor market, we can work together to create a stronger, more prosperous future for all Alaskans. Thank you.