Chicago Fed president Austan Goolsbee on the economy, health of our financial system

We break down complex business news to help you understand how money moves in Chicago and how it affects you.

Jobs have been growing and the stock market has been soaring, but many U.S. consumers don’t feel the economy is working for them.

But Austan Goolsbee, president of the Federal Reserve Bank of Chicago, says our banks are safe and Americans should feel secure.

The Chicago Fed is one of 12 regional banks that ensure the U.S. financial system is stable and serves the public interest.

WBEZ’s Reset checks in with Goolsbee about the state of the U.S. economy, the health of the U.S. financial system and the role the Fed plays in monetary policy.

We also learn what goes on behind closed doors at his institution, including behind the 80,000-pound door of the vault. This interview has been edited for length and clarity.

How optimistic consumers should feel about the economy

Goolsbee: On a scale of 1 to 10 where a normal boom is 9 and a normal recession is 1, it certainly feels like a 7 or 8. … By some measures of the labor market, we were, if anything, over hot. We were growing so fast. And the labor shortage was so acute that it wasn’t really sustainable. … We’re getting back into better balance.

How 2023 played out

Goolsbee: 2023 was a completely unprecedented year. Really quite strange in the history of the Fed and the monetary history of the country. In all previous business cycles, if you wanted to get the inflation rate down, that has only happened with a very substantial recession in the country. And unemployment went up. A lot.

A lot of people are old enough to remember the Volcker episode where to get inflation down, the unemployment rate literally went to double digits. We had a horrible recession. In 2023 … we had one of the biggest drops in the inflation rate on record and the unemployment rate never went above 4%. We didn’t have a recession. It was actually a fairly strong GDP growth year.

What he has his eye on this year

Goolsbee: As we go into 2024, the question is: Can that magic continue? And it probably cannot continue at the magnitudes that it did last year because once the supply chain is healed, it’s healed. It’s not going to improve as much as it did last year. But I still think there are positives, and if you look at the real economy, it’s been solid. We’re getting this last jobs number quite strong, and it’s followed several strong months in a row.

There are still some concerning elements like credit delinquencies on the consumer side rising. But at this level of restrictiveness, let’s call it, where rates are relatively high compared to inflation. I think you gotta pay attention to: How long do you want to be that restrictive? If you’re there too long, the unemployment rate is going to start going up.

What he says to people who worry if the banking system is secure

Goolsbee: The banking system is safe and sound. The first thing to note is that there’s FDIC deposit insurance. … The other thing is that banks can come to what they call “the discount window” in a crisis where the problem is not that they’re insolvent, but just that kind of like in your clip, the money’s tied up in these long-lived assets that can’t be turned into cash money too quickly. You can borrow from the Fed’s discount window if you’re a bank.

Why there are 12 regional Federal Reserve banks

Goolsbee: When they passed the Federal Reserve Act, people were nervous, uncomfortable as they are today, that Washington D.C. and New York City would control the financial system of the United States. So they created kind of a hodgepodge system. … Those regional banks are supposed to bring independent views to monetary policy.

Each one of those reserve banks talks to business leaders, talks to community leaders, talks to all sorts of different folks. And they bring not just statistics and numbers. They bring those feelings and how people view the economy. They bring that to the table too when deciding the interest rate.

How much money runs through the Chicago Fed each day

Goolsbee: There is a vault in the Chicago Fed with a door which weighs 80,000 pounds. And there’s $25 billion of cash sitting in that heavy security. There are Brinks trucks coming in and out, hundreds of millions of dollars per day of cash. We get shipments from the Bureau of Engraving and Printing. We also have money machines that count the money and pull out the counterfeit.