by Robert Powell, Editor

The nation’s central bank should do more than shift gears on interest rates, says the president of the Federal Reserve Bank of Richmond.

Jeffrey Lacker told the Virginia Association of Economists meeting in Richmond on Thursday night that the Federal Reserve Board should try to influence the public’s expectations of inflation by issuing clear statements of its policy and setting a national inflation target. Such steps, he said, would enhance the Fed’s credibility and help stabilize prices. The Fed and public should not be lulled into complacency by the low inflation that the country has enjoyed since the 1980s, he added.

“Central banks are as responsible for the behavior of inflation expectations as they are for the behavior of inflation,” said Lacker, who was the sole voice in the Fed advocating higher interest rates during the last four meetings of its Open Market Committee last year.

One person in the audience who appreciated Lacker ‘s points was Neil Murphy, professor emeritus at Virginia Commonwealth University. He recalled working for the Fed in 1965 when monetary policy was a closely guarded secret. In fact, former Fed employees would become “Fed watchers” who would interpret the board’s actions for companies. Murphy sees Lacker’s suggestions as part of a move toward more openness at the Fed begun in the 1990s. “You give up a little flexibility, but it’s worth the price to gain the benefits,” he said.

Murphy and two other economists interviewed at the meeting, Ann Battle of the Virginia Economic Development Partnership and Barry Pfitzner of Randolph-Macon College, were optimistic about the continued growth of Virginia’s economy despite national concerns about growing foreclosures in the sub-prime mortgage market. A shakeup in the sub-prime market ultimately could be positive, said Pfitzner, if it weeds out lenders who were making bad loans. “It teaches a lesson that needs to be learned.”

Battle pointed out that Virginia’s economy is somewhat cushioned from the shocks of the national economy because of the proximity of federal government jobs in Washington and the vast number of federal contracts held by Virginia companies.

Of more concern was the long-term effects of inadequate funding for programs such as Social Security and Medicaid as more than 75 million baby boomers move toward retirement. “I don’t think Social Security is going to do much for me in retirement,” said Battle.

by Jessica Sabbath, Special Projects Editor

What a difference a year makes.

Let’s picture the General Assembly’s status last year. The Republican-controlled General Assembly was deadlocked. Conservative and moderate Republicans couldn’t decide whether new taxes and fees where necessary to fund the state’s aging transportation system. A 60-day session turned into a 246-day marathon. Legislators went home with empty hands.

Now, let’s look at this year. On the last day of the 2007 General Assembly session, the legislature approves a mammoth transportation bill in a close Senate vote. (Amazingly, the session finished on time.) Gov. Timothy M. Kaine says the bill is inadequate for ignoring rural Virginia and taking money from the state budget that funds schools, social services and public safety. Some expected he would propose a statewide tax or fee increase but — as Kaine said during his Monday announcement — that would have meant an immediate death in the House of Delegates.

So when Kaine announced his proposal, which uses less money from the general fund by dedicating one-third of an existing tax on auto insurance premiums for transportation, it was…surprising. Surprising because there wasn’t a statewide fee increase proposed. Surprising because it asked to borrow $500 million more than the Republican plan. And most of all…surprising because Kaine and Republicans leaders seemed to support the same bill.

The legislature meets next Wednesday to act on Kaine’s amendments and vetoes. Some of the bill will likely be changed, but the tone between Republican leaders and the Democratic governor is radically different than what we’ve heard in years. It’s just unfortunate that this conciliatory tone will last only a short time — elections are just eight months away.

Which U. S. metro area has the most “knowledge” workers? San Francisco? New York? How about Washington, D. C.? There is more knowledge, aka “creative” workers, in the Washington area than in any other metropolitan area of more than 1 million, according to a new report from the Greater Washington Initiative, a research and economic development marketing organization.

That means about 1.1 million people work in fields such as professional services, information technology, education and research, media arts and design, and health care. More than a quarter of them — about 300,000 — are employed in Virginia’s Fairfax County. So, it’s no wonder Fairfax is hosting the National Conference on the Creative Economy in October.

As defined by the study, a “knowledge” worker refers to people “who use, analyze, and develop ideas and information in their daily tasks at work.” Nearly all of the professions in which they are employed require a college degree. That’s one of the reasons these workers are seen by many observers as major influences on regional economies.

Some cities see catering to the “creative class” as the path to revitalization. Author Joel Kotkin, a recent speaker at the Hampton Roads Economic Development Alliance, offers a dissenting viewpoint in a commentary in our April. He believes cities must focus on providing jobs for the middle class.

It looks like Virginia may finally be getting a $3 billion fix for its aging transportation network. After a months-long stalemate on the funding issue, Democratic Gov. Timothy M. Kaine has proposed amendments to transportation legislation that apparently have the support of Republicans in the General Assembly. Nothing is certain until legislators return to Richmond next week to act on Kaine’s changes to bills passed during the regular session. But for now it looks like the politicians took the high road. They stepped up and provided leadership on a crucial issue — the job they were elected to do.

Sounds like the name of a movie, and a good one at that. However, it refers to a national networking group that assists women entrepreneurs. With 45 franchises in cities across America, Canada and one in Cape Town, South Africa, the network continues to grow as more women start businesses. In fact, firms in which women-hold a majority ownership are growing at twice the rate of all other companies in the United States. 

So it’s no wonder they’re looking for a network of like-minded individuals.  Ladies Who Launch offers coaching, online programs and incubator programs.  In Virginia, Richmond has a local chapter headed by Central Virginia leader Susie Galvez.

For seven years, Galvez owned and operated Face Works, a Richmond day spa.  Tonight, she’ll begin leading her first four-week incubator session. Nine women have signed on for what Galvez says is a weekly, two-hour session that encourages women to realize their business dreams. “Women do business different than men,” she says. “We sound board, we risk credit card debt, we do things as a team, and we want everyone to win.”

Cost for the incubator is $299. For more information, check out the group’s Web site at http://www.ladieswholaunch.com. or contact Galvez at 804 364-7113.