An avid cyclist, Nate Kauffman looks at economic conditions that impact development like the winds he encounters on his bicycle. Lean into a headwind to power through, while a tailwind can help you, he said.

"But when you're dealing with a crosswind and something that goes from 10 miles an hour with gusts up to 40, those are the ones that can knock you off," Kauffman said. "We've actually referred to some of the economic developments that we've seen the last six, eight years as things that could be akin to crosswinds."

Kauffman, an economist by trade, is Senior Vice President and Omaha Branch Executive at the Federal Reserve Bank of Kansas City. Based in Omaha, he represents Nebraska with the Federal Reserve, offering insight into the state's economy. Kauffman discussed the national economy and its impact on local development during the 37th annual Commercial Real Estate Seminar in Omaha on Aug. 22.

"Economic growth in the U.S. and regionally, and even here in Omaha, has been resilient over the last few years post-pandemic, despite what we could all list as a very lengthy list of potential risks and significant sources of uncertainty," Kauffman said. "Similarly, Nebraska's economy has been pretty steady, and a lot of the themes that you will see at a national level do tend to relate to the kinds of things that we see in Nebraska."

Not all of Nebraska has been resilient, though, Kauffman said.

"As you go farther west and interact with rural communities in the state, you're going to hear a different narrative that comes by way of agriculture," he said.

Nebraska saw the largest decline in Gross Domestic Product – 6% - in the first quarter of 2025, according to the federal Bureau of Economic Analysis. 

Kauffman focused on urban development, since that's the area with which most of the people attending the CRE Summit are involved.

The Federal Reserve maintains dual responsibilities of monitoring risks between inflation and the labor market, and their impact on economic growth, he said. As inflation reached 2.7% in July and the national unemployment rate increased to 4.1%, Nebraska's unemployment rate remained steady at 3%.

"We have seen some cooling in the labor market, but generally speaking, my summary here is to suggest, still, despite the risks, unemployment is still quite low," Kauffman said. "We all know that here in Nebraska, this is an area where unemployment tends to be lower than most places because we don't typically have the same kinds of ups-and-downs that you see in other parts of the country, some places that might be tied to certain types of industries that see extreme increases followed by maybe more significant declines."

Nationally, economic growth is measured as Gross Domestic Product (GDP). Reviewing the last 40 years, the United States experienced a strong GDP of about 3.5 between 1990 and 2000. The GDP experienced about 3% growth from 2002-2007.

Between 2009 and 2019, the country had about 2.5% economic growth. Coming out of the COVID-19 pandemic, the United States enjoyed 3% growth.

This year, the first quarter slowed to about 1%. It's trending slightly lower to no change.

"What I skipped...is the recessions that we went through, to show you what the pace of growth has looked like over the last several economic expansions, and these expansions have actually become quite longer in duration over time," Kauffman said. "If you were to go back much further in history, you would typically see that economic expansions did not necessarily last 10 years."

The U.S. economy still experienced pandemic-related issues into 2022, he said.

"We still were dealing with the implications and consequences associated with the pandemic, where you had lots of comments about supply chain disruptions, inflation had begun to surge," Kauffman said.

Russia's invasion of Ukraine in 2022 also impacted American economic growth, he said.

As inflation surged, the Federal Reserve took the step of raising interest rates as a way of managing it, Kauffman said. Despite the increase in both interest rates and inflation, the economy kept rolling along, he said.

People began to anticipate a recession in 2023. Federal Reserve representatives were often asked about it, he said.

"When's the next recession going to be?" Kauffman said. "The reality is, when you look back now at what has transpired over the past two years, keeping in mind where we were in August of 2022, that growth has really been pretty remarkable. What stands out is that growth really has been resilient. So, despite the forecasts that people may have offered that there was a chance of recession, growth really was pretty similar to what we had seen in most economic expansions in recent history."

What is the country - and Nebraska - experiencing now?

"As you get into 2025, this is where the theme of the crosswind starts to emerge," he said. "Because a lot of what we heard in March and April, and we all know the story around tariffs and trade policy, and the uncertainty that that generated, is when businesses face these kinds of - let's call them unpredictable crosswinds - what do they tend to do? I mean, if I were riding my bike, what I have to do, really, I have no choice, is to go slower, because you can't necessarily risk the kind of dangerous situation you find yourself in if that cross wind comes that you're not expecting."

The economy's projected slowdown may be nothing more than an adjustment, he said.

"You can see the forecast for the second half of this year, and there is an expectation of some amount of slowdown, and some of that could be because we're still potentially dealing with some of the implications associated with those uncertainties and trade policy," Kauffman said. "Some of it, though, I would argue, could also be because we were coming out of a period that you see in the post-pandemic time frame that was exceptionally strong. So maybe it's reasonable to expect that there's some amount of reversion back to what might have been more historically normal."

As the Federal Reserve focuses on a goal of 2% annual inflation, the economy is experiencing the Reserve's second risk, a cooling labor market, Kauffman said.

Interest rates play a significant role in project development and length, Kauffman said. While several industries focus on short-term loan interest rates, the main concern for most developers, brokers, and realtors is the long-term interest rates, he said.

As the Federal Reserve's 12-member Board of Governors analyzes the risks facing the economy, it will examine five areas of concern, Kauffman said.

The first is inflation expectations, he said. As the Fed analyzes inflation rates, it pays attention to where inflation might be headed in the future, Kauffman said.

"So, when we gather people around the table and we ask questions, we're not often asking questions of people to tell us, ‘What did you do six months ago?’" he said. "We're trying to ask questions about what are you going to do in the next six months? Have you seen the effects of tariffs yet? If not, how much do you expect to see? Because it's ultimately what people think about inflation expectations that will be a significant driver of the level of interest rates over the long term."

Thinking about the nature of the US economy and what often is the case, as global demand for safe assets is the Federal Reserve's second concern, Kauffman said.

"Historically, what you would see is something that affects long-term interest rates that isn't necessarily something that would show up as it relates to an implication of the Fed funds rate," he said. "Where is instability in other parts of the world and in other large economies? Or disruptions elsewhere. When there's a large amount of uncertainty and fear, global investors have tended to gravitate to U.S. treasuries because of the nature of that market, very deep, very liquid, and a safe market to be in."

Geopolitical developments and other things positioned alongside the U.S. economy are going to affect what happens with respect to rates, by way of demand for safe assets is the third area of interest, Kauffman said.

"Let me emphasize that these are my comments and my opinions only," he said. "These are not the Federal Reserve's fiscal policy and government debt. So, we know what this potentially looks like. We know some of the conversation. To give you a quick number, we went from about 60% relative to GDP in terms of national debt, up to a number that's north of 100% and expected to continue to rise, so to the extent that that path continues upward, the level of debt, and obviously the responsibility to service that debt plays into. Ultimately, what that will require in terms of interest rates, as well."

The fourth area to watch is productivity and population growth, Kauffman said.

"It matters substantially, and you all know that; you feel it in the market when you talk about where there are growth opportunities," he said. "And maybe even where there are pockets in Omaha, where there's even more potential, because it is driven to a significant extent by what you see as population growth. The United States, not different from most other developed economies, has been facing a population growth slowdown, and that is something that would affect long-term rates, as well.

"This has to be offset against things like productivity. So, where you see lots of excitement about AI and its connection to the labor market as the extent to which it could potentially generate productivity gains in the future. So those are two things that, over the long term, will also affect interest rates. If you have a population slowdown, that's going to suggest a lower interest rate over the long term. If you have stronger productivity gains and an increase in expected economic growth being driven by an AI boom, that's going to lead to higher interest rates. So, to the extent that you think that those things are going to be important, it gives you a little bit of a way to think about it."

The last area is that the Federal Reserve isn't the only game in town as a central bank, Kauffman said.

"There are others that are making similar calculations in their own economies, dealing with their own shifting risks, and so it matters what happens in terms of interest rates globally," he said.

Despite the mentioned risks - policy-based, globally-based - the economy really has been resilient, Kauffman said.

"It's actually pretty tremendous just how resilient the U.S. economy, and even this region's economy, has been despite those pressures," Kauffman said. "But there are pressures, and those pressures do seem to be growing. Some of them are starting to play out in terms of what you see with respect to employment opportunities, and that's where I think you're going to start seeing some amount of shift in terms of the Fed's policy response. But then, also recognizing, as I mentioned, there will be other factors that are affecting the kinds of rates that you're most interested in, to the extent that they are affected by the viability of projects and investments that you're involved in."

Tim Trudell is a freelance writer and online content creator. His work has appeared in Flatwater Free Press, Next Avenue, Indian Country Today, Nebraska Life, Nebraska Magazine, Council Bluffs Daily Non-Pareil and Douglas County Post Gazette, among others. He is a citizen of the Santee Dakota Nation.