Fed Listens Explores Nashville's Booming Economy
Music City is an economic smash hit these days, but equitably spreading prosperity remains a challenge.
At an April 11 Fed Listens event in Nashville, Federal Reserve Bank of Atlanta president Raphael Bostic and Federal Reserve governor Christopher Waller listened plenty as business, civic, and education leaders spoke about opportunities and issues that characterize the national economy through the lens of their local experience. In particular, panelists explored the ways that Nashville's employment and population expansion are affecting labor shortages and inflation, generating abundant job opportunities but also creating challenges as the area attempts to rebound from the COVID recession.
The Federal Reserve launched Fed Listens in 2019 as the central bank crafted the monetary policy framework it adopted in August 2020. The Nashville event was the second Fed Listens in the Atlanta Fed's district, after a 2019 session in Augusta, Georgia. The original round of Fed Listens events proved valuable in preparing the policy framework, so Fed leaders decided to resume the sessions when pandemic restrictions eased.
At the Nashville event, Fed governor Michelle Bowman noted via video link that the views of people at Fed Listens sessions help inform monetary policy decisions. "Those decisions inevitably will be better decisions after we have heard you," said Bowman.
Bostic added that the listening sessions are a critical component of the Atlanta Fed's efforts to gather real-time information that lends texture and nuance to aggregate economic data, which are inherently backward-looking. "We need to know what's really happening on the ground, not have people just tell us what they think we want to hear," the Atlanta Fed leader said in brief opening remarks.
Bostic added that Nashville made an ideal location for Fed Listens because it is a vibrant metropolitan economy composed of sectors important to the national economy including information technology, manufacturing, health care, logistics, and entertainment.
From call centers to corporate headquarters
Nashville has enjoyed startling growth. Total nonfarm employment has increased almost 40 percent since the start of 2012, nearly triple the pace of job growth across the country. Meanwhile, Nashville has added about 30,000 residents a year during the past decade.
The chief executive for the commercial real estate firm Colliers Nashville, Janet Miller, commented that 25 years ago Nashville was a hub for call centers and longed to attract corporate offices that lately have flocked to the area. Nashville job seekers can be choosy enough that it takes the global investment firm AllianceBernstein 20 percent longer to fill openings there than elsewhere, said Kate Burke, chief operating officer of AllianceBernstein, which moved its corporate headquarters from New York to Nashville in 2018.
Nashville's thriving labor market is benefiting lower-wage workers as well. Some leisure and hospitality employees who were laid off early in the pandemic have found more lucrative work in other fields. As travel and tourism dried up, construction did not slow. As a result, many immigrant women who had lost jobs cleaning hotel rooms found work in construction, mainly as painters, at better wages and with more favorable schedules than their old jobs offered, explained Jose Gonzalez, a cofounder of Conexión Américas, a nonprofit that helps Latino families succeed in Nashville.
Meanwhile, the abundance of job openings is creating a quandary for local community colleges such as Nashville State Community College. The school's president, Shanna Jackson, said that in the current tight labor market it is hard to convince students in programs like culinary arts and health sciences to complete their education because they can land a job before finishing school. That situation is not altogether bad, Jackson noted, and Nashville State officials try to give students flexibility to attend school while they work.
However, in the long term, she believes students should earn degrees because the job market will likely become tougher for job seekers at some point, thus making the credential more important.
Real estate investment has mixed repercussions
Nashville isn't just attracting people and jobs. It is drawing real estate investment from finance capitals like New York, Los Angeles, and Dubai, said Miller, a former head of the area's chamber of commerce. Miller calls the influx of capital "a frenzy almost" that has sent property prices soaring.
Yet a near-frenzy in the real estate industry is "not a good thing for the average resident," she said, adding that typical first-home buyers might get outbid on 20 properties before securing a house. "The equity issues have become much more pronounced."
One such issue is gentrification. Emanating from downtown Nashville, gentrification is spurring "a tsunami of displacement" of residents and small businesses that is likely to accelerate, said Gonzalez.
Gonzalez and other panelists at Fed Listens emphasized the need to think hard about how the rush of property development and investment might affect disadvantaged populations during the next 20 years. Workforce development is important in ensuring that people can not only find a job, but a job that earns a family-supporting wage and taps a person's full potential.
Joshua Mundy, chief executive officer of Pivot Technology School, a technology training program, pointed out that it makes little sense for someone to commute 45 minutes to a job that pays $13 an hour. Mundy said he views the lack of available labor in Nashville as an opportunity shortage as much as a talent shortage.
His organization strives to create direct pathways to senior-level software development positions and other high-paying jobs in information technology. An essential part of that quest, he explained, is devising ways for low-wage workers like customer service representatives to get training and skills to move to higher-paying jobs. Junior software development positions in Nashville pay an average of about $65,000 a year, Mundy said.
"We want to take them to the front of the line because in tech the algorithm determines everything. So when [employers] receive a resume, if it doesn’t have certain key words, they’re not going to get a call back," Mundy remarked. "So how do we set these individuals up for success and also give them an equal opportunity to make the good money?"
In the same vein, Jackson of Nashville State emphasized that a significant issue facing Nashville now and in coming years is ensuring that locals, and not just newcomers, have a fair crack at new jobs.
Maintaining results amid high inflation "almost impossible"
Fed officials in Nashville heard not only about labor market dynamics but also inflation. From the operator of a small chain of pizzerias to an executive of a national trucking firm, business leaders discussed the pervasive impact of rising prices.
Crissy Wieck, chief sales officer of the trucking firm Western Express, said the overall cost per mile to haul goods has doubled in five years. Specifically, she said the company raised drivers' wages by 40 percent in 2021, and the price of trailers has nearly doubled to roughly $50,000. Western buys about 2,000 trailers a year, she said. What's more, a dearth of new trucks means there are few used trucks available for smaller truckers to buy and then relieve supply chain pressures. The rapid rise in trucking costs directly affects the prices of groceries, hardware, and other consumer goods. "It's all connected," said Wieck. "Everyone happens to know that now."
E.J. Reed has likewise seen costs rise, but for items including cheese, smoked meats, and pizza boxes. As a result, Slim & Husky's Pizza Beeria, which operates nine restaurants mainly in Nashville, Memphis, and Atlanta, has raised prices. At some point, explained Reed, the firm's cofounder and chief financial officer, rising costs force discussions of how to maintain quality without hiking prices so high that customers turn away.
"How do you achieve the same results if all of your costs of goods sold have gone up 25 percent?" he said. "It’s almost impossible."
That question didn't arise at the first round of Fed Listens, Waller said. He recalled that in 2019 discussions focused on how to sustain employment growth and put upward pressure on wages. At that time, inflation had been below the Fed's 2 percent objective for years.
"It's just a completely different environment," Waller said.