Fed Reserve bank CEO talks Texas economy, job outlook for graduates
Robert S. Kaplan, president and CEO of the Federal Reserve Bank of Dallas, visited UH to interview U.S. District Attorney Preet Bharara for a private event last week. The Cougar had a chance to sit down with Kaplan after the event and discuss the state of Texas’ economy, job outlook for graduating students and his thoughts on student loans.
Before starting as head of the Fed in September 2015, Kaplan was a professor of management and associate dean at Harvard Business School and previously served as vice chairman for Goldman Sachs Group, Inc., holding responsibility for the firm’s global investment banking decisions.
Kaplan also has a close relationship with chancellor and president Renu Khator, who is chair of the Dallas Fed Board of Directors.
The Cougar: What do you think is the job outlook for students who are graduating this year or next year compared to what they would have seen five years ago?
Robert Kaplan: There’s always a risk of being a little out of date, but I would guess that the job prospects for students are a little better than they were five years ago. The unemployment rate is lower. There’s less labor market slack. It would be better.
TC: And what about ten years ago, before the economy had a downturn?
RK: It depends on the time, and I would say it may be comparable. The issue is the mix is different today. The financial sector is smaller — some people would say that’s good. Startups are more significant. What I’ve found being a professor at Harvard is more students are interested in doing startups or something more entrepreneurial. They might be more inclined to go to Google than they would to go to a big financial firm. The mix is changing, but that’s not driven by the opportunities, that’s driven by the interest of students. I think the interests are more entrepreneurial today than they were.
But a lot of the job market is a year to year thing. It depends on a lot on: how’s the economy doing? Is it a stable economy? Probably pretty good. Texas is a great place. It’s growing with tremendous migration. I know the energy issue has been a headwind, but that won’t go on forever. I’m very optimistic about the future of Texas, that’s for sure. For those students here who are going to stay in the state, it’s very optimistic.
TC: What sectors besides energy do you think are really carrying the state?
RK: As head of the Fed — well, I can talk factually. The state has become a very diversified state. Energy makes up about 10 percent of GDP in this state. Which means 90 percent is technology, health care, services, you know, all across the board if you look in Austin, Dallas, El Paso, and even here in Houston. So this is a very diversified economy. It’s got a better, or just as good as, a representation of industry as any state in the country. It’s the largest exporter, I believe, of any state in the country also. This is a fantastically diverse state.
So my advice for students would be to figure out what you’re interested in. There’s plenty of variety here, and it’s increasing. Figure out what you have a passion for, what your skills are, and pursue that.
TC: What advice would you have for students who want to be entrepreneurs?
RK: You can be in a rush, but not so much of a rush that you don’t develop your skills. The most important thing in your first five years out of school is: develop your skills. If that’s in an entrepreneurial venture, that’s great. If it’s for a company, great. The most important thing for me is that during your first five years out of school, you have to learn and build your skills. Whatever you do, pick a job that helps you do that. That’s the most important advice I could probably give. Don’t waste this time, and don’t pursue money or a quick buck if it would not allow you to fully develop your skills. You don’t want to be 35 and starting over. Do it while you’re young.
TC: What does not wasting your time look like?
RK: Develop learning. Am I learning, am I learning, am I learning? That’s the number one rule I use, and it’s the rule you should use if you’re graduating from school. Am I learning? Am I building my skills?
TC: What have you learned since you started as the head of the Fed in September?
RK: A lot of things. Everything about how the Fed works, macroeconomics, monetary policy. I’ve learned an enormous amount from the private sector, and I interact an enormous amount with the private sector. I’ve learned from people. I’ve learned from Dr. Khator from the way she does her job here as well as at the Board. You’re learning a whole series of things every day.
TC: What do you think the biggest impact, on both students and the economy as a whole, has been because of levels of student loan debt today?
RK: It’s a big problem. It’s a very negative impact. One, it affects student job choices. Number two, it will ultimately, unless it gets paid off, overhang on the ability to spend. The consumer is the key to this economy, and if people are dragging along this big iron chain and ball of student loans, it retards their ability to buy a home, start a family, do all the things they need to do.
This is really a national issue. Everybody’s got a role in this. The level of tuition… those levels are going to be under scrutiny, I would guess, for the rest of our lives. My guess is alternative forms of education will increasingly disrupt and threaten (universities). But I think good schools — and I know Renu worries about this — are attentive to this, are trying to make sure they provide good value, are making sure students are graduating. The best indicator of being able to repay your student loans is that you graduate, statistics show. For those listening, you have to graduate.