While inflation remains too low to meet the Fed targets and wage growth is still weak, the U.S. labor market is "kind of tight," he said in a speech to the Executives Club of Chicago. "We are very close to full employment."
That's a term the Federal Reserve uses when most people who want jobs and are able to work have jobs.
In such an environment, he said he wouldn't favor a program to build roads, bridges and other infrastructure merely as a means to stimulate the economy. But he said the country needs a program for building highways, bridges "and things we need. An infrastructure plan would be terrific."
With unemployment at 4.6 percent, he said, "You don't need stimulus; you do need a plan for roads and bridges."
In the past, some economists advocated an infrastructure spending plan to bring life to an economy going through a slow post-recession recovery, but Congress has been reluctant to take on a major spending plan.
During the recent presidential campaign, candidates from both parties talked about rebuilding infrastructure to strengthen the economy. And Illinois stocks such as Deere & Co. and Caterpillar have soared in anticipation of an infrastructure-building program that presumably would be spearheaded by President-elect Donald Trump. During the last three months, Deere stock has climbed almost 22 percent and Caterpillar is up almost 17 percent. Both make machinery used to dig and move dirt for construction.
Evans said conditions in the economy suggest a trend toward the 2 percent inflation level the Federal Reserve wants to see as a sign of a stronger economy. With the buildup in employment and other signs of strength, the Fed is widely expected to raise rates at its next meeting Dec. 13 and 14.
Evans is expecting the economy to grow about 2 to 2.5 percent in 2017, and he said corporate tax cuts could help stimulate growth. Yet while Trump has said he plans to push for tax cuts, Evans said it was too early to predict the impact because specifics are not yet clear.
Apart from domestic policy, Evans said the U.S. economy has been held back by slow growth throughout the world. U.S. companies have been reluctant to invest in new equipment and facilities because demand for products has been slow, said Evans.
"The U.S. economy is the strongest in the world," he said. Yet he noted headwinds such as an aging population that will continue to be a drag on growth and perhaps fight against the 3 or 4 percent growth that has occurred after previous recoveries.