Sometimes the experts get it wrong – really wrong.
Which can be very good news indeed.
Exhibit 1 – Surprising many economists, the “soft landing” – reducing inflation WITHOUT super high unemployment – is real.
A key indicator shows the inflation rate is now lower than it was 2 years ago.
Now…you will hear some caterwauling that this or that measure is wrong because it isn’t what people actually buy. Okay, let’s look at what people actually spend their money on – a metric called the “Harmonized Index of Consumer Prices” – it’s the green line in the graph below.
As of July 2023, that rate is a paltry 2.5% – right in line with the Fed’s desired inflation rate.
Make no mistake, engineering a soft landing defined as fixing inflation without high unemployment – is rare indeed…Those of us who remember the early eighties recall mortgage rates of 17%, unemployment in the high single digits, and a job market that was horrible/awful/lousy…(I graduated college in 1980…)
The other part of this is wages…which have gone up by about the same amount as inflation – except for nonsupervisory workers.
Those workers have seen “considerably” higher wage increases. The recent strike settlements will make those workers even happier…which will drive consumer spending…which drives the economy…which increases tax revenue…which lowers the deficit.
For some reason a lot of folks don’t believe things are going well…in fact, a recent poll “found that 51% wrongly believe that unemployment is nearing a 50-year high rather than those who believe it’s actually low (49%).” [emphasis added]
When you’re in a funk it can be tough to believe there’s good news…but things will get even better.
Over the next decade, the Inflation Reduction Act, CHIPS Act and other legislation will create another 1.5 million jobs – per year. Source is Moody’s Analytics)
What does this mean for you?
The economy is good – and getting better – and this is very good news indeed.
