A Conversation With Austan Goolsbee

This 2025 Mackinac Policy Conference session was crafted in partnership with Crain’s Content Studio. 

• The Federal Reserve Act gives the Federal Reserve a dual mandate: stabilize prices and maximize employment.   
• Michigan is disproportionately impacted by tariffs.  
• Housing inflation continues to grow, but not in relation to the price of goods.  

Tariffs are expected to impact the Midwest and particularly Michigan, the most impacted state in the country, said Austan Goolsbee, President and Chief Executive Officer of the Federal Reserve Bank of Chicago. In fact, four of the top seven states most exposed to tariffs are in the Chicago Federal Reserve district.   

“Before April 2, I was hearing from business leaders here that if these tariffs are as big as what they say, it’s going to have a very material impact on conditions, and [hearing] expressions of we don’t want to go back to 2021 and 2022, when costs were raging out of control. And that we definitely don’t want to go back to 2020, when the supply chain was so disrupted, we literally could not make our product.”   

The Chicago Federal Reserve district, which includes Michigan, is the most cyclically sensitive of the Federal Reserve’s districts.   

“Like with Michigan, [the district] is a leading indicator of recession,” he said. “Usually, if the economy starts turning down, where you see it right away are in these cyclically sensitive industries.”   

There are three possible ways that tariffs could “jump out of their lane,” Goolsbee said. That includes whether there’s retaliation from other countries; whether the tariffs affect the parts and supplies needed to build products in the United States; or whether people become worried about the tariffs and change consumer spending or business investment.  

Goolsbee’s mentor, former Chair of the Federal Reserve of the United States, Paul Volcker, served during a tumultuous time of stagflation in the 1970s and 1980s – but Goolsbee said we are not experiencing the same today.  

“If in ‘Back to the Future’ style, you could call people in the 1970s, and you said, ‘Oh, hey, we’re dealing with stagflation, how can you help us?’” Goolsbee said. “The first thing they’d say is, well, what’s your unemployment rate? And you’d be like, ‘Well, it’s about 4%.’ Four? What’s your inflation rate? ‘Well, you know, it’s two-and-a-half.’ They’d be like, ‘Why are you bothering us?’”   

In the 1970s, stagflation was 13% inflation with almost 8% unemployment, not what we are experiencing today.   

“Stagflation is the direction, but it’s not stagflation,” he said. “It’s not 1970s-style stagflation.”  

Housing inflation remains high, Goolsbee said, but it’s important to look at it in relation to the price of goods.   

“Look at the relative price of housing – housing versus going to Target or Costco or Walmart – the price of goods versus the price of housing,” he said. “It has been an extreme case the last couple of years that housing inflation remained very high and goods inflation returned to the norm of the last 15 to 20 years of mild deflation in goods.”   

That’s not a new phenomenon, he said. Over the last 15 to 20 years, housing has gone up about 5% each year, and goods inflation has fallen about negative 1%.   

“If something compounds 5% a year for 15 or 20 years, the level is going to be very different,” he said. “When you hear young people today say, ‘My dad had one job and used to be able to afford a big house and I can’t even afford a condo,’ they’re not wrong. They’re relative. Now they can buy a lot more stuff at Costco than their dad used to, but the relative price of housing has changed a lot and has gotten much more expensive.”