What a Fed President Hears When He Goes on the Road

The Federal Reserve has a lot of official statistics it can look at to try and gauge the state of the overall economy. But there's also room for incorporating on-the-ground anecdotes and real-time color. When it comes to collecting this kind of information, Richmond Fed President Tom Barkin might be the biggest road warrior on the FOMC. In mid-April, Odd Lots tagged alongside Barkin as he undertook one of his many trips around his district, speaking to local businesses about what they're seeing in terms of inflation, consumer demand, and the labor market. We traveled with him to North Carolina, making stops in Mount Airy, Winston-Salem and Yadkinville, to better understand what it is that a regional Fed president actually does when he's collecting info on the ground, and how it informs his thinking. It's a rare inside look at the day-to-day work of a Fed president. In this episode, you'll learn what kind of questions Barkin is asking businesses. And you'll learn about some local businesses themselves — everything from carport manufacturing to producing thermal underwear to spinning yarn. We also take a look at some of the big picture challenges facing America's smaller towns, including shrinking populations, a shortage of housing, and the scarcity of essential services like childcare.

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Episode Transcript

Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio News.

Speaker 2 (00:09):
To have it play. Yes, thanks for making the course
with them.

Speaker 3 (00:15):
Yeah, so we're just getting started off the business.

Speaker 1 (00:19):
That's Tom Barkin, President and CEO of the Richmond Fed,
one of the twelve regional banks of the Federal Reserve.

Speaker 4 (00:25):
He's talking to executives at Carport Central, a manufacturing firm
that builds and sells carports, garages, barns, and even homes
made out of metal tubin.

Speaker 1 (00:35):
In addition to being a voting member of the Central
Bank's monetary policy body, the FOMC, Tom's responsible for actually
implementing that policy in his district.

Speaker 5 (00:44):
So united to.

Speaker 2 (00:45):
Prefers himself for worlds.

Speaker 4 (00:46):
Yeah, he's on one of his regular listening tours, traveling
by car around the Richmond Fed area, which covers DC
and several Southeast states, including North Carolina where we are
right now in Mount Airing, North Carolina.

Speaker 1 (00:58):
To be exact, Tom's invited us to come along as
he learns about the businesses in his district and what
they're seeing when it comes to inflation, the labor market,
consumer demand, and the general economic outlook.

Speaker 6 (01:09):
Thank you guys for coming out. First of all, we
don't know.

Speaker 7 (01:12):
Whatever you guys need from us, We're here to answer
the questions, and we're going to tell you about our
industries demand.

Speaker 3 (01:17):
We're interested in labor markets for insta in supply chains,
for instance of pricing.

Speaker 2 (01:21):
Perfect to understand.

Speaker 4 (01:24):
You'll get to hear what a FED president hears is
he embarks on one of these research trips. What are
the questions he asks to get a better handle on
the direction of the economy, And what kind of questions
get asked to him.

Speaker 7 (01:35):
What is it like now that prevents from lower interests?

Speaker 3 (01:43):
Well, technically nothing our next meeting, but I mean, but
practically it's that inflations too.

Speaker 1 (01:48):
We're also going to hear from local businesses themselves and
learn about things like car ports, thermal underwear, and spinning
yarn from plastic bottles.

Speaker 4 (01:57):
And we'll here's some of the challenges and opportunities facing
some of America's small towns, things like shrinking populations, housing shortages,
and the difficulty of finding childcare. This is odd lots
on the road.

Speaker 8 (02:36):
Historic downtown mount Airy. There's a candy store, Let's go there.

Speaker 1 (02:42):
In many ways, mount Airy really is the quintessential American
small town. Sitting in Surrey, County in the northwest corner
of North Carolina. It was the inspiration for Mayberry, the
fictional idyllic home of the Andy Griffith Show. It's also
the first leg of Barkin's trip for this week.

Speaker 3 (02:59):
We try to go to that we haven't been the
big cities work themselves. I'm there naturally to give speeches
to rotary clubs or chambers of commerce, but the small
towns you have to put them on your calendar. And
we picked am on Eric as we hadn't been here
before and we'd heard some interesting stuff about what they're
doing in the workforce.

Speaker 4 (03:15):
Once the locations are chosen, Barkin and his team generate
a list of the region's key employers, then start reaching
out to set up interviews and maybe a meal or
two with some of the local community leaders.

Speaker 3 (03:26):
We always want to find whoever the biggest businesses are
and try to understand because they'll have the best input
on the labor market. And then I do try to
do a round table where I can of whatever the
core businesses in that community. It was aquaculture and the
Northern Neck. It's tourism in a place like Mount Area.
I'm trying to understand the core part of every town's

(03:46):
economy and how that's performing.

Speaker 4 (03:49):
Tom's not wrong about the importance of tourism in mount Airy.
The Andy Griffith Museum and Mayburry themed shops on main
Street inspire thousands of tourists to come every year.

Speaker 1 (03:58):
It's a pretty cute town. There's a downtown area with
a store that sells moonshine ice cream, which was delicious.
There's Mayberry RFD cop cars parked on the street, and
a gospel music store is selling guitars, which you love,
Joe I did.

Speaker 4 (04:13):
But there's also other types of businesses around too. Take
for instance, Carport Central. The company makes these outdoor structures
that you can use to protect your car from rain
or snow or sun, but it also makes bigger things
like barn dominiums or prefabricated houses. It's actually one of
several companies in the immediate area that manufactures these structures,
making the rural county a sort of hub for the industry.

Speaker 1 (04:36):
Albert Laura, the president of Carport Central, explains to Tom
why that is.

Speaker 7 (04:41):
My brother and I've been in this industry over close
to twenty four to twenty five years, so almost since
it first started back in ninety nine and ninety said,
and actually ninety eight ninety nine the beginnings of this industry,
but it kind of grew in this area. So Surrey
County is pretty much the hometown or home place, so
the birthplace of this type of structure. Now there's been

(05:03):
other structures made out of different you know, tubing, like
round tubes all that that's you know on the West coast,
but to be square tubing and to go to what
we're doing now is different. So a start off, and
you probably drove by even where you live, you see
the little tops and people perked their cars, or you
drive by some kind of dealer that sells outdoor equipment
or something you see a little sign that as a price.

Speaker 6 (05:26):
Well, that's how it pretty much started in.

Speaker 4 (05:29):
It's an interesting time to be a FED president talking
to businesses about what they're seeing day to day. Across
the economy. Inflation is still above the Central banks two
percent inflation target, but unemployment is still at its lowest
level in years.

Speaker 1 (05:41):
And even though the FED isn't satisfied with progress on
prices in some respects, the US economy has to fight expectations.
A lot of people thought things would cool down as
the FED hyped interest rates at the fastest pace in decades.
Many thought we'd be in a recession by now.

Speaker 4 (05:57):
But that hasn't happened, and yet there's still a lot
of un certainty over things like consumer demand and the
ultimate impact of tighter monetary policy.

Speaker 1 (06:04):
And in many ways, the carport business is kind of
emblematic of a lot of recent trends in the economy.
Sales boomed in the aftermath of the pandemic when everyone
was buying cars or adding stuff to their houses, and
then there were supply chain issues, and the business has
since seen some tailing off in demand.

Speaker 7 (06:22):
COVID hit and it was like a boom because everybody
pretty much got an influx so that they had bought
in our video and they bought Yeah, they needed this,
and people were at home, well, I now needed a
place to put my stuff in redo my bathroom. I'm
going to put all my stuff in this building now,
which is great, but again, you know what happened. They
are supply chain issues, and so a lot of the
material was delayed and then they came in and it

(06:43):
was a higher price, and it was just a crazy time.

Speaker 1 (06:46):
But so for Tom the big questions right now are
what carport Central is seeing in terms of pricing. Because
when stuff was booming, carport manufacturers could all raise their prices.
But as things normalize, it's becoming a lot more competitive.

Speaker 3 (07:00):
So on the rest on the car port side, does
that mean that your pricing is under pressure.

Speaker 7 (07:05):
Yes, so we have to compete with an inferior product,
but we the consumer at a certain point, they don't
really take that in consider. So, you know what, I
just want the lowest product, even if we tell them, well,
you know, our product is you know, thirty to forty
fifty percent stronger than what you're getting, and unfortunately we

(07:27):
have to either match the price or in some cases
try it undercut it. But the thing is we're paying
a whole lot more for our you know, our materials
and of course our designs and everything.

Speaker 6 (07:38):
They're they're just they're they're way above what most people
are are getting.

Speaker 2 (07:43):
Now.

Speaker 9 (07:43):
To answer your question a little bit, is are pricing
Our profits have gone down because of the competitors in
the market that are continuously doing things wrong, so they've
cheapened the product. So we were making more money pre
covid COVID. Now we're the only industry that I know
of that the inflation. Everybody that went up, we were

(08:06):
the other way. When the person went down, Our pricing
went down with.

Speaker 2 (08:10):
The inflation fighting organization. Thank you for that.

Speaker 6 (08:13):
But our labor is still read yeah.

Speaker 1 (08:16):
And labor costs and availability of workers creates an interesting
dynamic in Surrey County, North Carolina has seen its population
boom in the years since the pandemic. In fact, it's
still one of the fastest growing states in America, but
that population growth hasn't been spread evenly. In Mount Airy
there are now about ten seven hundred residents, not much

(08:37):
more than the ten four hundred people that were recorded
here more than a decade ago, back in twenty ten.

Speaker 4 (08:43):
That means the area is having to get creative when
it comes to the labor market. For instance, there's an
apprentice program called Surrey Edgin Works. It's been placing hundreds
of local high school students into internships and apprenticeships for
things like welding, manufacturing, and teaching, providing future workers for
those businesses and giving young residents a re stentistick around.

Speaker 3 (09:03):
So many of our small towns have a problem with
population growth and workforce growth, and this is an effort
to try to get local people meaningfully engaged in the
workforce in places where there are lots of good jobs.
And I think that's a very interesting thing that other
communities might want to replicate.

Speaker 1 (09:20):
And businesses like carports Central have had to get more
creative when it comes to their labor too.

Speaker 7 (09:25):
It's not as efficient when you get to a large
volume production. You have to have faster equipment, you have
to have more automation or more people. One of the two, right,
more people, more regular equipment. But for us, we went
with a little bit more automation. We still have to
have more people, but automation has helped us get to
where we're at streamlined. But what we've noticed is that

(09:45):
at the beginning, say last year, we were working forty
five to fifty maybe sixty hours of some cases, you know, Saturdays,
half Sundays, one shift. We wanted to cut back to
forty hours, and we didn't want them to work on weekends.
But we still have a lot of demand, so we
had to get more efficient in our processes. And the guys,

(10:06):
you know, they were very very hesitant at first because
obviously they were used to getting a fifty hour pay
check verse sixty hour overtime.

Speaker 6 (10:14):
But we told them, look, let's try this.

Speaker 7 (10:17):
We want you to spend more time with your family,
you know, we want you to enjoy. We don't want
you to have to stress having to come in and
finish this, or we don't want you to rush through
it where it's not.

Speaker 6 (10:28):
The exact quality we want.

Speaker 7 (10:30):
So yeah, so now that's changed a lot. And I
think that's probably why back Tommy's point is, our turnover
rate isn't as much as it probably is for other manufacturers.

Speaker 4 (10:42):
So Carport Central has been able to adjust to some
post pandemic pressures.

Speaker 1 (10:47):
But there are still some restraining factors on its business.
Take for instance, banks and the availability of credit. Not
only have interest rates surge as the FED fight's inflation,
but banks have also been pulling back on some loans.

Speaker 10 (10:59):
What's the constraint on your growth right now? Is it
getting the materials?

Speaker 1 (11:03):
Is it availability of contractors?

Speaker 2 (11:06):
Like?

Speaker 1 (11:07):
What what's stopping you from selling even more?

Speaker 7 (11:10):
I guess for us it's gonna be more financial institutions
understanding our business more.

Speaker 6 (11:17):
I think the supply chain issue.

Speaker 11 (11:20):
For us, it's it's it's okay because we have access
to different supplies, but it's more of having a backing
of a financial institution for us.

Speaker 7 (11:32):
So credit, but our turnaround time in our industry, luckily
it is pretty quick. But because of the fabrication time
and their time scheduled for commercial projects, they don't they
are not able to pay us let's say within maybe
ninety days, and we are credit terms are say net
thirty net forty five.

Speaker 6 (11:52):
Uh So basically we have to have a reserve of cash.

Speaker 7 (11:56):
You know it'll come in, but it's just a delayed situation.
The growth that we're seeing, we're actually being restrained because
of not having access to the capital that we need
to Actually.

Speaker 3 (12:08):
What we're telling you when you go talk to them
and say I got a business and I got a
lot of demand and I just need.

Speaker 7 (12:12):
A little more capital, well, I think right now it's
more mostly because of the way the economy is going.
They're really they're not as free you know, telling you, hey,
come on in, let's help it.

Speaker 6 (12:23):
It's more like let me see if I can.

Speaker 7 (12:25):
I don't know if I can. You know, that kind
of situation, not like it was before.

Speaker 3 (12:28):
But it's access rather than rate because you could say, oh,
they'll give it to me it's just costing me too much.

Speaker 6 (12:34):
Yeah, I think it's more access. I think people are
more reserved with that.

Speaker 4 (12:37):
And as we've seen before, even as the company gets bigger,
that creates a new set of challenges.

Speaker 7 (12:42):
But with the other challenges that we're facing, competition, but
also the lending part.

Speaker 6 (12:48):
Getting to that, you know.

Speaker 7 (12:49):
It costs money for an AUDI, you know, it cost
you have to have a team of CPAs you know,
you have to have a financial you know, it's more money,
more you know, income that's that's dedicated to that instead
of dedicated to equipment and growth.

Speaker 9 (13:04):
So that's where and I don't know, maybe you've seen
other banks of other companies and internal processes too. For
on the accounting side, you know, growing so much that
we were growing twenty five thirty five percent every year
for the past five six years. But then we got
to that point where okay, quick books can only do
so much, right, so we went to an ERP system.

(13:27):
You know, going to that EP system has been a
very very hard struggle over a year now try and implement.

Speaker 2 (13:35):
Nobody address that. So that's what also.

Speaker 4 (13:38):
For those of you wondering, an ERP system is basically
software used to organize a company's finances, supply chain management,
and a lot more. The reason this is familiar to Tom
is because not only does he spend a lot of
his days on the road talking to businesses about stuff
exactly like this, but he also spent many years at McKenzie,
the consulting giant before he joined the Richmond Fed.

Speaker 1 (13:57):
That background is one reason he takes such an intro
in the nuts and bolts of local companies. But what
does he do with the information that he gets from
these meetings. At the end of the first day of
his trip, we sat down with Tom to talk about
what he'd heard. You know, the town's commerce department says,
we have to compete with other areas in order to

(14:17):
attract developers. Or you speak to the head of a
carport company and they say, well, it's difficult to get
financing for what we're building here.

Speaker 3 (14:27):
Well, sometimes what I learn is confirmatory, sometimes what I
learn is new. We had a dinner where we talked
to a bunch of people about the labor market, and
what they told me, which was news, was that they're
still short workers in teaching, in healthcare, in state and
local government. And you know, that's where most of the
jobs have been added over the last year, and one

(14:47):
of the big questions is is that cycle complete or not.
They sort of sent the message it's not yet complete,
which is helpful, you know, to know there's still a
little bit of juice left in the job market. We
had a conversation with a carport manuf facture and they're
feeling significant price pressure. And if you care about inflation,
that's good to know and again maybe confirmatory that on

(15:08):
the good side, there's still price pressure coming. This housing
thing is very interesting in terms of shelter costs. Is
housing availability getting plentiful enough that you can imagine shelter
costs coming down or is it still tight enough that
we have a challenge. And so you know, I try
to bring what I learn in the economy into the
room at the FOMC and hopefully am able to build

(15:29):
confidence when I do twenty of these conversations, not just
one that I learned something about what's happening to goods
inflation and services inflation and shelter inflation, that I know
what's happening to the labor market into wages, and I
have a real time sense of what's happening to demand.
So that's that's what I'm learning. And you will have
noted that I asked thirty those questions today, many of
them off cycle. You know, as I meet somebody right

(15:50):
before a speech or before I talk, I'll turn to
them and ask how their business is doing and try
to see what I can learn.

Speaker 4 (15:56):
For Birken, the anecdote learns from local businesses help to
supplement and all the official data that DEFED gets constantly,
things like non farm payrolls, weekly jobless claims, and much more.
So it's interesting to ask him if he ever sees
or hears things on the ground before they show up
in the official data. So you mentioned when we talked
about the sort of anecdotal learnings or from the examples

(16:18):
you gave were sort of either confirmatory or maybe informed
something at the margins, like okay, maybe there's still more
juice on the public sector for labor side. How often
does it come up where people will start consistently saying
something that, oh, this is really not showing up in
the data yet, and it's sort of an early signal
of something that later on you say, yep, there it

(16:40):
is playing out in the numbers.

Speaker 3 (16:41):
I'd say every quarter there's something like that. So in
the fourth quarter last year, in October, you may remember,
the numbers were really really frothy, and I wasn't hearing
any of that in the market. Actually came out and said,
that's just not consistent with what i'm The inflation numbers, know,
the demand numbers, the consumer spending numbers, retail sales numbers
were very fraud the that's not consistent. I'd say today.

(17:04):
We just got a retail sales report recently that was
quite strong, and I'm hearing decent consumer spending. I'm not
hearing that strong. Maybe I'll be proven wrong by the
time this errs, but you know that's what I'm hearing.
I do hear things that are different, and then i'd
hear some number of things that are in advance. May
of twenty twenty in Bristol, Tennessee opened, Virginia wasn't open.

(17:28):
It was right at the end of the first part
of COVID, and I talked to a developer who said, oh,
I got the malls are packed. And that was before
any of us knew that the opening of the economy
would lead to that kind of spending. That's a good
example I'll also get a reasonable amount of i'll call
it segment specific information. You know, how our higher income
consumers thinking versus lower income consumers, or what's the job

(17:51):
market for professionals versus skilled trades, and so the overall
number may be the same, but you'll get some insight
into what's really driving it.

Speaker 1 (17:59):
While gathering information to supplement his data, the folks he
talks to are also learning from him. Something we saw
over and over again on our trip to North Carolina
is that people are just fascinated by what the FED
actually does and how it works. And at a time
when inflation is still running above target and there's still
a lot of doubt about the direction of the economy,
there are more questions than ever about what the FED

(18:21):
is doing.

Speaker 4 (18:22):
Obviously, everyone wants to know where interest rates are heading,
but they also want to know what other businesses are saying,
what the Fed's hearing, and crucially, how the FED processes
all that information. So these trips are not just a
chance for business leaders to tell a FED president what
they think. They're also an opportunity to find out what's
on his mind and get their own questions answered. More
on that in our next segment.

Speaker 10 (19:02):
I think we'd love it sooner by j Nuts.

Speaker 1 (19:06):
Welcome to the Winston Salem Rotary Club's weekly luncheon. This
week's guest speaker is, of course, Tom Barkin.

Speaker 4 (19:13):
Tracy, I'm glad we finally figured out what a rotary
club is.

Speaker 1 (19:17):
Yeah, I had this sort of vague idea in my mind,
but I had to look it up to It is
a society of I would say, civic minded people who
meet regularly to network and take on some community projects.

Speaker 6 (19:29):
About the community.

Speaker 12 (19:30):
I felt like every week dot Com I learned something
about my city that I didn't have there.

Speaker 2 (19:36):
That's cool.

Speaker 4 (19:38):
The Winston Salem Rotary Club has been going on for
more than one hundred years, all the way back to
when Winston Salem was basically cigarette central. Today, driving around
Winston Salem, I'm pretty sure we saw more vineyards and
breweries than we did tobacco fields.

Speaker 10 (19:52):
So please give Tom Barkin a warm welcome.

Speaker 1 (19:55):
As part of his trips around the Richmond Fed District,
Barkin often speaks to local business groups and societies, giving
his regular stump speech about the state of the economy.

Speaker 3 (20:04):
Thanks Chris, I appreciate that advertisement. So it's great to
be back in Winston. I'm a proud deacon parent.

Speaker 1 (20:12):
But the reason he enjoys doing it is for the
Q and a portion afterwards. Taking questions from the audience
members helps reveal what's really on people's minds.

Speaker 3 (20:21):
I want to know it because I do think this
two way interchange on the economy is really quite valuable.

Speaker 4 (20:26):
Even if you're a regular watcher of the FED, you
can learn a lot from this discussions.

Speaker 13 (20:32):
A flavor of which your int free media and you
had me favor not me, Midmar, very beautiful.

Speaker 3 (20:43):
You know what I'm mostly interested in is real time information.
You're trying to figure out what's actually happening in the marketplace.
So I get credit cards spending every week year, every year,
and during COVID I got pretty calibrated on what that
means in terms of retail sales. But that's something I
look at closely to try to get a sense of
demand consumer spending. Seventy percent of the economy. On the
labor market, the job support that comes out every month

(21:06):
is clearly the best, most secure thing. But I take
some comfort from the weekly jobless claims because it's at
least a real time measure of whether layoffs are accelerating,
which is what you'd see if the economy turns out.
And I think you kind of get the point I'm
trying to figure out, is there any risk of the
economy turning? That's really what I focus on In terms

(21:27):
of the meeting. Maybe I'll give you a ten day
look at it rather than just the meeting itself, because
the weekend before ten days before the meeting. The weekend
ten days before the meeting, we'll get the staff does
a two hundred page vertical text, greatest analysis the economy
you've ever seen, and it'll include domestic and international and

(21:49):
financial markets and lending markets, and different scenarios for where
the economy might go, and different monetary policy operations, and
so it's a brilliantly done piece of work.

Speaker 1 (22:00):
Wouldn't it be cool to see that two hundred page
FED staff analysis of the economy.

Speaker 4 (22:04):
Definitely, But I'll settle for the speeches and meetings.

Speaker 3 (22:08):
At the same time, Jay Powell sends around his first
draft of what the statement might be, and so we
work all weekend and into the week debating how we
want to talk about the economy and whether we like
that statement we'll offer. Jay, I'm giving this background, so
you understand that, I mean, we'll give offer Jay our
perspective on the statements. He always likes, mind best that

(22:31):
it's not actually true the statement. I'm making the point,
the statement that we issue the Wednesday of the meeting
has largely, not always, but largely been pretty well vetted
by the time you get to the meeting, So we
don't go to the meeting and try to line edit
a statement. For the most part, every time that the
chair has a bad press conference, that's because we've line
edited the statement in the meeting and we send him

(22:52):
out there two hours after the meeting to go defend it,
which is I think, in my judgment, a little bit
of malpractice. But we do it.

Speaker 6 (22:59):
Sometimes.

Speaker 3 (23:00):
In the meeting itself, there's often a special topic, and
so the staff will present some papers on a special
topic and we'll have a debate about it. Then we
all go around and talk about economic conditions. So I'll say,
I've been in the district for the last seven weeks,
and here's what I think I've learned, and here's what
I take solace from in the recent data. And here's
what I think you know are some interesting conclusions you

(23:22):
might not have otherwise thought about. Then we all talk
about the statement. Pretty productive meeting. It's a reasonably formal meeting.

Speaker 10 (23:30):
It's not.

Speaker 3 (23:32):
It's not really flippant. There's not tons of humor in there.
You know, it's a it's a pretty serious mean. But
it's also every every word is transcripted, so if you're
having trouble sleeping, you can go get them from five
years ago and read through both.

Speaker 4 (23:52):
About thirty miles west of Winston Salem, then half an
hour's drive south from Mount Airy is Yatkinville in yet
In County, population thirty seven thousand, seven hundred, and for
the better part of the past decade that population has
been shrinking.

Speaker 1 (24:06):
It's day two of Tom's North Carolina tour and we're
starting off at the offices of textile manufacturer in Deira Mills.

Speaker 6 (24:13):
It works, it's worth a real good look.

Speaker 7 (24:15):
Well.

Speaker 3 (24:15):
One of the ways we pick our where we visit
is when you hear there's something interesting going on. And
we talked to the Sirri yak And Works yesterday up
in Surrey County. Yeah, and then we thought that would
be interesting today. And then we try to find the
big employers in a market.

Speaker 14 (24:30):
Well We're not a big employer, but we're pretty unique.

Speaker 6 (24:33):
We've got a good story to tell.

Speaker 4 (24:35):
That's John Willingham, the fourth generation owner of India Mills
in Yadkinville. His company can trace its history back over
one hundred years, all the way back to Colonel Francis
Henry Freese, who is the first president of Lacovia Loan
and Trust, which eventually grew to be one of the
biggest banks in the US before being bought by Wells
Fargo in two thousand and eight. In addition to banking,

(24:56):
the colonel started a bunch of textile businesses in the
early nineteen hundreds.

Speaker 1 (25:00):
Right because North Carolina used to be a global player
in textiles. There were mills in almost every single one
of the state's counties as recently as the nineteen nineties,
and just thirty years ago, those mills were employing some
two hundred and eighty thousand workers, but that started to
change as global competition heated up and companies moved production
outside of the US. Today, there's just an estimated thirty

(25:23):
nine thousand textile workers in the state.

Speaker 14 (25:25):
We migrated up here in nineteen ninety eight. We were
in one hundred year old facilities in Western settem and
this was a good community. We already had satellite plants
up here, so we came to Yakinville and then we
got on board with NAFTA and moved our manufacturing a
lot of our labor work to Mexico.

Speaker 3 (25:45):
And is that I managed to survive the whole exact
trauma that happened around here.

Speaker 6 (25:49):
That's exactly why.

Speaker 14 (25:50):
So what we kept here in Yakinville is a back office, functions,
design work, and distribution. So all of our labor work
is in Mexica. We have plants in Monera, Mexico.

Speaker 1 (26:04):
So Yakinville was a big mill town once upon a time,
but like lots of places in America, this particular type
of manufacturing just got hollowed out.

Speaker 4 (26:13):
In Dera survived in part by outsourcing its production. They
also started specializing in thermal underwear and tracy. I just
have to say I love thermals anyway, today you can
buy in Deer's Thermals and places like tractor supply and
exporting goods.

Speaker 6 (26:28):
We realized that to survive we needed a niche. We
needed something.

Speaker 14 (26:33):
That we could control, and that was a very small
market and not a very interesting one for a lot
of larger players like Hange of Gildan for the looms,
so we picked thermal underwear and we became sort of
the go to.

Speaker 6 (26:46):
People in thermal underwear.

Speaker 14 (26:48):
It's a highly seasonal business, or coires a lot of
working capital because we built inventory all year and that
keeps people out of it.

Speaker 6 (26:55):
And who do you sell into?

Speaker 2 (26:57):
Do you sell? Do you brand yourself?

Speaker 6 (26:58):
Do you sell it?

Speaker 14 (26:59):
We do mostly our brands, but we also do private label.
We like to tell people that we do everybody but Walmart.

Speaker 1 (27:08):
Now, just like with the carport business, pricing is obviously
an issue in the apparel industry too. If you look
at apparel in the Consumer Price Index, you can see
clothing inflation basically peaked at more than six percent year
on year back in twenty twenty two, but in more
recent months, inflation and apparel has been kind of moderating.
It came in at zero point four zero percent in March,

(27:31):
and that's kind of been the story of inflation across
the US recently. Housing costs and services keep going up,
but some goods like apparel, aren't seeing quite the same
kind of pricing increases anymore.

Speaker 4 (27:43):
Endearer's experience also says something about post pandemic demand. It's
basically ridden a roller coaster here. When COVID struck, it
started making face masks, but demand for masks went away.
Is the pandemic petered out and people aren't buying thermals
like they once were either.

Speaker 14 (27:57):
We were the very first people to make man I
mean we were like the day after the shut down,
and we couldn't we couldn't get off the telephone. It
was everybody from American airlines to Centas uniforms. They all
wanted masks, and so we we just did.

Speaker 6 (28:14):
Everything we could do. By June, it was parent that
that wasn't going to last.

Speaker 14 (28:20):
When the economy started to come back, it was so
strange because demand was this outh roof.

Speaker 6 (28:30):
There was a lot of.

Speaker 14 (28:31):
Money in the consumer's hands and they were buying anything
and everything. They were buying online like crazy, and so
there was a surge of business that occurred, and we
were all chasing it as hard as we possibly could.
We were just you know, we were blind to the
fact that this was an artificial situation and it wasn't

(28:54):
going to last.

Speaker 6 (28:54):
We were riding the wave, and then.

Speaker 14 (28:57):
It caught up with itself and there was a letter
a crash. Obviously, inflation had gone crazy.

Speaker 2 (29:03):
But that's now we're in late twenty one, early twenty two.

Speaker 14 (29:05):
Exactly, and demand just fell off. Our largest customer at
that time, Amazon.

Speaker 6 (29:12):
Just shut the books. They were so overstopped because they
had been chasing it, just like all of us, everybody.

Speaker 1 (29:20):
Joe Indarra Mills is also where we learned there's basically
a Jones Act for textiles. It's called the Bury Amendment.
Here's Tom and John talking about that, as well as
the company's decision to move their textile production out of
the US.

Speaker 3 (29:33):
I know I know the answer this question, but I'm
going to ask because I get asked a lot, which is,
did you consider moving it back to the States.

Speaker 2 (29:41):
No, and just give us your logic.

Speaker 13 (29:44):
It was.

Speaker 14 (29:47):
This skill level is just not here anymore. When we
closed out sewing here in nineteen ninety four AFT I
believe it was ninety four. When after it came in,
we had three hundred people here and yet can feel
sewing and.

Speaker 6 (30:05):
They were they were gone instantly. They found other.

Speaker 14 (30:07):
Jobs to bring that labor force back and to train
it and to pay not just the base but all
the fringes and all the ancillary costs to go with it.

Speaker 6 (30:19):
We would not be competitive. I just say it.

Speaker 14 (30:21):
Now, you're from me with a Bury Act, which is
products that have to be made into US because of
government requirements, whether it's a.

Speaker 6 (30:28):
Military sort of think. There are manufacturers of our.

Speaker 14 (30:33):
Type of product on a small scale here because of
the Bury Act.

Speaker 6 (30:37):
They made flags and they make uniform lots of military.

Speaker 14 (30:43):
We chose not to get into that, but we would
not be able to bring our company, the labor part
of our company back to the to the States. It's unfortunate.
I mean, it broke our hearts when we had to move,
but we either moved or are.

Speaker 2 (30:59):
So it happened.

Speaker 11 (31:00):
I did.

Speaker 4 (31:01):
But even after outsourcing production in Mexico, a company like
Indira isn't sitting still and they're currently shifting manufacturing again.

Speaker 6 (31:09):
We're leaving Mexico. Oh to go where else?

Speaker 2 (31:12):
Our door?

Speaker 1 (31:13):
Oh that's interesting, Yeah, you're sort of a lot of
companies are just now moving into Mexico.

Speaker 2 (31:18):
Well, John is.

Speaker 6 (31:22):
Mexico.

Speaker 14 (31:23):
We were in Mexico twenty five years in Monterey, Mexico.
I don't know if you've ever been there.

Speaker 6 (31:28):
It's quite a city.

Speaker 14 (31:30):
You could be dropped in there and you would think
you were in Atlanta or somewhere, But we've seen it
grow up in twenty five years from carts and buggy,
horse and buggy to modern highways and everything. Inflation is
pretty serious there. Of course, everything is unionized there, so
you're dealing with an element that we don't have to
focus on.

Speaker 15 (31:50):
Now.

Speaker 6 (31:51):
We have Makuila doors, so we don't we.

Speaker 14 (31:52):
Just contract for labor, we don't own it, we don't
know pay directly. But inflation is pretty tough there, and
they've essentially priced us out.

Speaker 4 (32:02):
And so when Deer has been able to survive in
the mill business in part by adapting to these new challenges.
But there are still some complications that come from being
based in the small town.

Speaker 2 (32:12):
Housing.

Speaker 14 (32:12):
Housing shortage here is is dramatic and it hurts. It
hurts the manufacturers here, it hurts the economy. Small town
America is a special place to live. And I consider
you active.

Speaker 6 (32:25):
A small town.

Speaker 14 (32:25):
I mean, the values are so great, the work ethic,
just knowing everybody in town first named basis, fewer fears
and of certain things.

Speaker 6 (32:36):
So it's a it's a cool place to live small town.
But you've got to you've got to be successful as a.

Speaker 14 (32:41):
Small town, you need good progressive government, and you need
a base of businesses, a few large businesses.

Speaker 6 (32:47):
A lot of small medium sized businesses.

Speaker 14 (32:49):
You need, you need culture, uh, you need, you need
the elements that make life enjoyable.

Speaker 1 (32:56):
Yeah, Kinville isn't alone here. We heard similar things in
Mount Airy too. Smaller towns may have cheaper land for construction,
but that doesn't mean developers are flocking to them. Here's
Tom talking to us about exactly this.

Speaker 3 (33:09):
You know, every small town is competing for developers, and
there's a limited number of developers that gave a speech
on this in November, and developers care a lot about
availability of cheap land. Developers care a lot about permitting
and infrastructure in the land, and developers have the ability
to choose. And so what they told us here is

(33:29):
if you go a little bit further south, where it's
closer to an interstate, the developers are prioritizing there.

Speaker 7 (33:34):
Now.

Speaker 3 (33:34):
They had a bit of a roadshow for developers and
they think they're making some progress. So that says something
about what a community can do in terms of proactively
seeking developers. And I think that's actually a pretty important thing.
If you want housing built in your community.

Speaker 4 (33:47):
I find this actually to be like a kind of
fascinating dynamic, right because in my mind you would think
of like the developers are all competing against each other
to find the cheapest land available or whatever it is.
But this idea that from maybe like a community standpoint,
it's the other way around arguably, and that it works

(34:07):
and such that they need to basically pitch the developers
on coming here.

Speaker 3 (34:12):
Yeah, So after the Great Recession, what happened is a
lot of developers went under and left the business, a
lot of banks stopped financing development. We underbuild housing for
a decade, so we're light developers. In addition, what's happened
during the post pandemic era is there's been so much
construction going on, not just houses, but also data centers

(34:33):
and warehouses and state, local government, educational that we're short
construction people too. And so you know, if you took
the entire economy, you'd say, we're actually really short construction capacity.
And that's what leads to it. It's an adjustment issue.
It doesn't mean it's a permanent problem, but it is
right now an adjustment issue. And if you're short housing
in your community, you really need that housing to get

(34:56):
launched today.

Speaker 1 (34:57):
So towns like Yatkinville and mount Airy are doing what
they can here by proactively courting developers and experimenting with
new models for childcare to course correct for that ongoing shortage.

Speaker 15 (35:09):
And there just isn't enough childcare. When we did the
study in twenty twenty one, Yatkin County was the third
worst in the state for the number of children according
to I think Babi's report for the number of infants
in toddlers per slot, we're about nineteen two. One side

(35:30):
why is that there has been a huge reduction in
the number of childcare providers. It's like eighty two percent
have reduced within the last twelve years.

Speaker 2 (35:45):
So it's so it's.

Speaker 15 (35:47):
Been shrinking partially because it is difficult to maintain a
license to get the star rating. Star rating is like
a quality rating, and here for private providers, we don't
other than one family home in the western part of
the county, there are no four or five star rated

(36:07):
childcare providers.

Speaker 4 (36:09):
That's Sandy Scanelli of the shallow Ford Foundation. She's spearheading
a new type of childcare model that would see providers
pool and share resources like buildings, playgrounds, and operations to
help load their costs. Tom met with her as part
of his tour of the county. So typically speaking, a
childcare provider would have to do the legwork of like
finding the location and furnishing it and building it out itself. Yes,

(36:31):
and so the main right and so the main thing
that this solved sounds like is just like they just
have to rent this. They can focus on what they
do taking care of children without having a tour about
all these other ancillary things to get the physical.

Speaker 15 (36:46):
Because licensing is both for the individual as well as
for the facility. And when we did our study, what
we found is that I'll give you an example. One
of the playgrounds needed new mulch. It was going to
cost eight thousand dollars to replace the mulch. That's the
key licensing factor is you have to have six inches

(37:09):
of fluffing mulch. And so every time it rained, they
were running outside with pitchworks to fluffuck the mulch. Well,
those kinds of stresses are a distraction, honestly from managing
that facility. So to have the facility taken care of
and maintaining that license really allows more focus on the childcare.

Speaker 10 (37:35):
Smart starts only doing the facility. It's not an other
shared cost model like.

Speaker 15 (37:40):
HR that sort of Actually no, they will also offer
back on support to each of those businesses if they
are interested in it. Part of this.

Speaker 4 (37:50):
So the hope is that if some of the back
end can be centralized, then the actual childcare providers can
focus on what they do best, providing childcare and reversing
the decline in total capacit.

Speaker 1 (38:00):
And of course this isn't just a small town problem.
A shortage of childcare providers and high housing costs, all
of which contribute to inflation, is pretty much the story
across America's economy. At our next stop, we talked to
one of the largest employers in the county and see
how all the things we've talked about labor, housing prices

(38:20):
have impacted them as well.

Speaker 10 (38:41):
Hi, thank you, Hi, welcome, Welcome to Unified.

Speaker 4 (38:46):
Hie Tracy allow Eddie, I'm Joe Wise great to make Eddie,
Eddie Ingle and the CEO of Grace.

Speaker 2 (38:53):
And thereby calls from Sweden.

Speaker 1 (38:56):
Just a few minutes away from Indarram Mills is the
Yatkinville factory for Unify, a publicly listed manufacturer of polyester
nylon and spandex yarns. It's headquartered in Greensboro, but it
has a pretty big facility here in Yachtkinville.

Speaker 4 (39:11):
It is a big facility. There is a huge recycling
center where Unified turns plastic bottles into a recycled fiber
and calls Reprieve. There are big trucks parked outside that
say bottles equal cool stuff, and there's cool stuff inside too,
including a showroom showing off some of Unified materials even.

Speaker 2 (39:28):
Where it comes from.

Speaker 12 (39:29):
The absolutely Reprieve is a product that we have now
that we take recycled plastic bottles and is chopped up
almost a lot of plastic corn flakes. At our reasonable
facility is cleaned, we separate the green and the brown

(39:50):
plastic from the clear in the blue. We use the
clear in the blue plastic in our yarn.

Speaker 1 (39:55):
That's Smith Williams Unifies hr Manager, but everyone calls them smitty.

Speaker 12 (40:00):
But the clear and the blue plastic is shipped here
to our recycle center where it goes through another process
becomes pet.

Speaker 2 (40:08):
This is from REDS and is pt REDS and.

Speaker 12 (40:11):
Then we take it and it is in lock plastic
bbes and it is melted and extrude, it goes through
large shower hands and as it falls five floors it
becomes a solid again.

Speaker 4 (40:25):
That plastic yarn is then sold to companies like Nike, Patagonia,
A six and others who weave it into their products.

Speaker 10 (40:33):
In this country, only about twenty eight percent of the
bottles are.

Speaker 5 (40:35):
Collected, and when we get a bail of bottles, if
we get around fifty six percent yield, because the collection.

Speaker 1 (40:41):
System here is not and that's Unified CEO at ee Ingle.
Bigger companies like Unify haven't been immune to post pandemic
challenges either. Eddie describes to Tom how the price of
plastic shot up in twenty twenty one and twenty twenty two,
including the cost of the plastic bottles that they used
to make into fabric.

Speaker 5 (41:00):
Marketplace, So that price that bail bottle goes up and
down significantly. It's been as low as thirteen cents in
the last six months, it's been as high as eighteen cents,
but it has been as high as fifty cents two
years ago. So with a fifty six minute yeld, it
can get very very expensive, very quickly.

Speaker 10 (41:14):
And that's an average number I've given you.

Speaker 5 (41:15):
But it's the fact that we have to take the bottles,
and we have to take the caps oft, take the
labels off, make this flake, and then we have to
take this flake and make it the chip and their
year losses are throughout.

Speaker 10 (41:26):
That whole supply chain.

Speaker 5 (41:27):
But it's what's cool is I say this all the time,
but you've never met a sad recycling. So what we're
doing here at tracks young people who want to be sustainable,
want to be purpose rhythm.

Speaker 10 (41:42):
And while yes.

Speaker 5 (41:43):
This raw material is more expensive and the yields are higher,
we aren't giving the brands what they need.

Speaker 4 (41:49):
So Unify as a lot bigger than many of the
other local businesses around it. In fact, it's the biggest
private sector employer in the Edkin County and it's had
the sort of secular tail end of demand from more
sustainable fabrics behind it, but it has encountered some similar issues.
Supply chain disruptions are still kind of reverberating and clouding
the picture of demand.

Speaker 5 (42:08):
So I'd say from a demand perspective, there was a
lot of over purchasing and the stocks of all these
brands and quoted the power brands went way up because
they basically had this supply chain issue. What used to
take thirty days from China was taking three months because
the votes were sitting out there. But everybody started ordering them,

(42:29):
not just in China, from Vietnam, from India, so they
had not just long supply chains.

Speaker 10 (42:33):
They over ordered to compensate.

Speaker 5 (42:36):
And then suddenly eighteen months ago, nineteen twenty months ago,
things started freeing up, so that all the brands globally
just pulled back on as many purchases as they could,
and that really impacted us. We're seeing consumer demand for
our products or down about seven or eight percent, maybe
six percent, so with.

Speaker 10 (42:56):
The de stocking.

Speaker 5 (42:59):
And not only do de stalking happen, but they said, oh,
I don't want to spend any of my cash on inventory,
so they're actually tightening up the supply changes. They're growing further,
taking more risk than they normally would. But I will say,
starting really beginning this year, most of the inventory seem
to be cleared out. So we are seeing business come

(43:21):
back slowly. Consumers are still constrained a little bit as
far as what we're reading.

Speaker 10 (43:28):
You got us better than I do.

Speaker 5 (43:29):
But you know that when the COVID happened, everybody jumped
to a casual and now they're coming back to wearing
a bit more formal. Oh, I got to go to
the office. I'm not going to the office. I got
to go to the office.

Speaker 2 (43:39):
So if I had thought about that, I'd want to
fleees today.

Speaker 7 (43:41):
Sorry.

Speaker 1 (43:41):
Yeah, And of course, hovering over this entire conversation, there
is still the question of price.

Speaker 2 (43:48):
But you know, in my day job, I'm worried about inflation.
I think.

Speaker 3 (43:51):
I think what I take from what you just said is,
you know, over the last couple of years, we have
not been your problem.

Speaker 2 (43:57):
You know, our prices have been headed down not.

Speaker 5 (44:00):
I mean I think you know one person's finish with
to somebody who's very knowledge about this. I think labor
always goes up no matter what. Yes, but if you
think about energy here, energy in North Carolina was very,
very stable for a long time.

Speaker 10 (44:15):
But as.

Speaker 5 (44:17):
Energy companies like two have invested in renewables, they've been
able to pass that cost on as they should or shouldn't,
I don't know, but they passed that cost on. So
our energy costs have gone up, not just because CREU
has gone off, but because the investment renewables. So we're
we are very, very energy intensive company. We use a
lot of energy here, we're involved in trying to negotiate that.

Speaker 3 (44:36):
With exact That took your cost, That took cost practicing
labour's taking your labor cost package take it.

Speaker 2 (44:41):
Yes, so you're saying prices have actually done about.

Speaker 10 (44:43):
Yes, But.

Speaker 5 (44:45):
When two thousand and twenty one, twenty two happened, we
had cost escalations because of bail.

Speaker 2 (44:51):
Bottle prices going out of and you've had that, and we.

Speaker 5 (44:53):
Had record it was record, Patrick Chmical prices went up
to a record if you remember CREWD was out one
hundred and twenty tw three, maybe one thirty is spike
for a day. But so all of that got you
had to put passed off. Yeah, otherwise you wouldn't be here.
And then but as it crashed and because demand slow down,
there was pressure to drop pricing. So I think we're
in this today, this weird spot where everybody knows prices

(45:16):
have to go up and it's just a matter of
slowly doing that in a scientific way. And again, where
is the value, How we capture that, how we price that?

Speaker 10 (45:27):
It is very challenging, you have to say from a
pricing pre here.

Speaker 1 (45:30):
This is another theme that comes up regularly in Tom's meetings.
Big and small companies seem to have experienced a lot
of the economy of recent years in very different ways.
We asked Tom about this. Do you notice a big
difference between what larger companies are saying versus smaller companies.

Speaker 11 (45:48):
I do.

Speaker 3 (45:48):
Smaller companies are still struggling to fill workforce jobs. They're
still struggling to fill jobs, and that's in part because
there was more wage more capacity to raise wages in
the larger companies than there were in the smaller companies.
So when we were with one earlier today, but when
you go to a smaller company, you do hear that
kind of constraint being much bigger. During the supply chain

(46:10):
shortage era, you absolutely heard that the big companies had
a lot more benefit than the smaller companies. And I
think when it came to the margin recapture cycle, the
big companies have led the way on that, and a
lot of small companies are still saying that they're working
to recapture margins.

Speaker 4 (46:27):
Being able to compete on wages isn't the only edge
that larger companies have in the current environment. Many of
them have also been able to refinance their debt. Contrast
out with the smaller company Carport Central, which told Tom
that bank lending is becoming a constraint on its business.

Speaker 1 (46:43):
That might be one reason, according to Tom, that economic
growth has so far defied the gravity of higher interest rates.
They just haven't flowed through to some parts of the
economy just yet.

Speaker 3 (46:53):
Well, so, the data that I keep coming back to
is interest payments is a percent of either personal disposable
income or or corporate revenue. And those numbers have only
now finally gotten back to twenty nineteen levels. And that's
because a lot of individuals pay down their credit cards
and refinance their mortgages, and a lot of companies paid
down their debt and refinance their debt. And so the

(47:16):
inaggregate impact of having the Fed funds rate at five
and a third versus you know, where it was basically
at zero hasn't really flown through the aggregate economy. Now,
it's certainly flown through to individual parts of the economy.
And you know, the most surprising things to me, you know,
obviously the residential market, where you've got the three percent

(47:38):
mortgage holders who don't want to trade into a seven
percent mortgage and are unwilling to sell their house. But
behind that is that you know, ninety two percent of
mortgages are fixed rate. Okay, so that's different than what
the economy was fifteen years ago. In commercial real estate,
you know, multifamily, you hear about a set of people

(47:58):
who really can't develop anymore, want to turn in the keys,
whatever version of it, and another set of people who
are owners who are feeling actually just fine.

Speaker 4 (48:06):
And unifies experience underscores that big refinancing trend. They refinanced
their debt in twenty twenty two and it has since
been investing in new equipment.

Speaker 5 (48:14):
From a balancing point of view, I feel pretty good
where we are, but it is impacting us because we
knew we were going to take on debt with this
new investment, and the investments based on equipment that was
really new and really differentiated. It's we'd had a spike
in capital capex for like three years and it was
on new equipment that was very, very different from what

(48:37):
we could have bought a few years earlier. And we've
been developed it.

Speaker 2 (48:53):
Well, you guys are great to make the time. We
really appreciate it.

Speaker 5 (48:55):
I just want I'm going to make it since you
walk out there just seem just look your head out
of episode.

Speaker 1 (49:00):
UNIFS Factory was the last stop for us, but not
for Tom. As we made our way to the airport,
he was already back in the car and on his
way to Greensboro for the next leg of his listening tour.
Barkin spends about two to three weeks of every month
on trips just like this one, which means that most days,
if he's not getting ready for the next FOMC meeting
in DC, he's in the car, or at another luncheon,

(49:22):
or taking one last look at another factory floor back and.

Speaker 5 (49:25):
Automaticly, yeah, all the way again.

Speaker 10 (49:32):
I saw that you wouldn't.

Speaker 9 (49:34):
You have to say it?

Speaker 13 (49:35):
So let's do we make stuff.

Speaker 5 (49:39):
That's what we did. We make crop Star.

Speaker 11 (49:41):
Well.

Speaker 2 (49:41):
I love that.

Speaker 4 (49:42):
So after two days on the road with a Fed
Bank president, what did we learn? Well, on the one hand,
there are some businesses that seem to be doing fine
in this environment. Meanwhile, others are struggling with the impact
of higher rates and moderating demand. All of these veried
individual experiences are one reason why it seems particularly challenging
right now to figuregure out what's going on with the
larger economy. One of the questions that I think people

(50:04):
are scratching their head is how did the FED raise
rate so much and yet the economy hasn't slowed down
as fast as people expected.

Speaker 3 (50:11):
Well, I've done it intentionally over the last three months,
probably fifteen different sessions with real commercial real estate groups,
because they're definitely feeling the impact of rates, and I
want to hear from those segments. When you talk to banks,
which I do a good bit, you also hear the
same thing. I was very interested because in theory, higher
rates should you know, hit the whole economy relatively quickly.

(50:31):
It starts with intra sensitive sectors like real estate and banking,
but historically manufacturings followed pretty closely, and I haven't heard
that much on the manufacturer side, So it was very
interesting to hear these guys talk about how creat availability
was constraining their ability to grow. Now you know they've
had some margin challenges, which you know they talked about

(50:52):
that could be relevant. And I do think the banks
I talked to will talk quite openly about tightening credit,
and part of that is just being prudent. You know,
in a world of uncertainty, you hear about it, but
then you get to see it, right, So now we
have in the economy. It's not just what people are
saying might happen, there's some evidence that actually is happening.

Speaker 1 (51:14):
Complicating the whole picture is also the overarching weirdness of
the post pandemic business cycle and the long term impact
that the pandemic experience may have had on businesses. This
is something Tom talks about a lot. I'm curious if
there are any lessons that businesses you speak to seem
to have internalized from the past few years the post

(51:34):
pandemic experience. So we used to talk a lot about
the idea of labor hoarding. Everyone was caught short during COVID,
so they hired a lot and they're terrified of having
to go through, you know, the same scarcity of labor again,
or the experience of raising prices and testing that elasticity
of demand. Are those things that people seem to have

(51:56):
actually internalized in your mind?

Speaker 3 (51:58):
Yeah, So maybe three things that come to mind supply
chain resilience. If you had everything in China before, you
have to ask yourself the question how smart that is?
And so I see everywhere people diversifying their supply chain
more near shoring than onshoing, but still or in certainly
Thailand and Vietnam, you know, in Indonesia playing a role too.
That's very clear. Second is I think a new respect

(52:22):
for the scarcity of labor. We lived in a world
where labor was long for a long time. Now it's short.
You talked about labor hoarding, but I think it's even
more than that. It's about investment and benefits and compensation
on a continuous basis. By the way, on the other
side of that, there's investment in automation that's going on
as well, but new respect for the scarcity of labor.
And then I do think on the pricing side. You know,

(52:42):
I've been talking about this for a while, but there's
a bunch of businesses that before COVID knew they had
no chance to increase prices, and then COVID happened, supply
chain trunk labor costs increase, they had no choice. They
went from having no chance to have a no choice,
and when they raise prices there were no squences, right,
And so we'd like to be on the other side

(53:04):
of that where they really thought there wasn't any chance
to raise prices again, but I'm not sure they're done.
And if they're not done, part of it is they're
trying to recapture margins. Part of it is they're just
a little more courageous. I talked to a furniture manufacturer
a couple days ago who just said, yeah, you know,
I used to just give in, but now I'm just
a little bolder. I've had the experience of raising prices.

(53:26):
I'm a little bolder, and I think it just takes
a while to get from no consequences all the way
back to no chance again.

Speaker 1 (53:33):
And that's ultimately Tom's message. In this part of North
Carolina and beyond, economic scars can linger for a long
time and play out in unexpected ways. There's still an
undersupply of housing in places like Yadkinville and Mount Airy,
in part because of the two thousand and eight financial crisis,
not just twenty twenty and the higher interest rates after that. Meanwhile,

(53:55):
the hollowing out of manufacturing in this area and other
parts of the US has been going on for decades. Now,
companies might be more aware of supply chain disruptions and
labor shortages, and they may be more willing to raise
their prices to offset them too, which could add to inflation.

Speaker 4 (54:11):
All of that creates difficulties for the FED, which is
still trying to balance inflation and unemployment in both big
and small towns across America. It has its data, and
it can attempt to assume some relationship between things like prices,
labor market tightness, and so forth, but it's hard to
know what that lingering psychological effect of the past few
years might be, let alone, what aspects of the economy

(54:33):
still have yet to be normalized. And if you think
about somewhere like the Richmond FED District, which has both
booming cities and deep rural areas, trying to gauge the
disparate effects that a given and policy change might have
gets even trickier. See after seeing all that, I'm not

(55:02):
sure how good we would be at the rate setting
part of the job of being a FED president. That
seems pretty tough. But I actually think we'd be pretty
good at the asking questions of business's part.

Speaker 1 (55:12):
Yeah, I would not want to be voting on policy moves,
but I did like how odd lotsy, let's say, a
lot of Tom's questions actually seem to be I feel
like we could do that. Shall we leave it there?

Speaker 10 (55:24):
Let's leave it there.

Speaker 1 (55:25):
This has been another episode of the All Thoughts podcast.
You can follow me at Tracy Alloway and.

Speaker 4 (55:30):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Thank you to Tom Barkin and the Richmond Fed, Jim
Strader and Maya Caatello for their help in putting together
this episode. You can follow them at Richmond Fed. Follow
our producers Carmen Rodriguez at Carmen armand dash O Bennett
at Dashbot and Cale Brooks at Cale Brooks. And thank
you to our sound engineer Blake Maples.

Speaker 1 (55:51):
And a special thank you to all the businesses who
participated and let us listen in on their conversations with
Tom Barkin and let us join their meetings and even
ask our own questions. If you enjoyed this episode, if
you like it when Joe and I go on the road,
then please leave us a positive review on your favorite
podcast platform. Thanks for listening.