Hafar1014
Diamond Member
- Sep 1, 2010
- 11,770
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You can see it in the recent data. Third quarter gross domestic product (GDP) came in at a strong 4.4 percent. Consumer spending, which makes up nearly 70 percent of GDP, remained healthy through the fall. The unemployment rate ticked down in December, coming in at 4.4 percent. For context, unemployment has only been this low three other times in our working lifetimes: in the late ’90s, in late 2006/early 2007, and the late 2010s.1 Unemployment claims remain stable, as well.Truth.^^^
This resilience has been enabled by strong underlying dynamics. Consumers have jobs, as I’ve said. With inflation down, real wages are now increasing. Asset values keep growing. Corporate earnings remain strong. In those circumstances, it’s hard to imagine consumers and businesses moving to the sidelines.
U.S. Economy: The Road Ahead
President Tom Barkin shares his views on today’s economy and the path ahead.
www.richmondfed.org
In parallel, personal consumption expenditures, or PCE, inflation has come back down from its peak and now sits at 2.8 percent. Near-term inflation expectations have fallen, suggesting more progress to come.
I hear reinforcing messages from businesses. I’ve talked personally to almost 75 companies since the start of the year, and they tell me demand is fine; their customers have learned to live with higher uncertainty. Most firms I speak to still aren’t doing layoffs at scale. Why would they, when demand and margins remain solid? Many of those who were determined to pass on tariffs last spring now acknowledge their pricing power has been significantly constrained by customer pushback; that’s good news for inflation. The recent rise in productivity also suggests these businesses can bear higher input costs without facing as much pressure to increase prices.
And the economy could get meaningful additional support from government policy. Significant stimulus is underway, from tax refunds, reduced withholding, and lower gas prices — not to mention the impact of the Fed’s rate reductions over the last year and a half. Deregulatory efforts should support growth, too. At the same time, the focus on slowing net migration suppresses the level of job growth needed to keep the unemployment rate steady. The renewed bipartisan emphasis on affordability could be disinflationary in coming months.
So, we can better see the road ahead, but to echo all of our family road trips: Are we there yet? Not quite. We have some distance to travel before we get home.
