Unjustified fears are hardly restricted to the far left or far right these days. Consider our economic situation, which looms highest on American’s current concerns.
First, the one on which we can’t sensibly disagree. In “Why Has the Inflation Calculation Changed Over Time,” by Stuart A. Thompson and Jeanna Smialek in the May 24th New York Times, we are reminded that the latest rate, April’s, is 8.3%. That was down 0.2% from March. The only algorithm adjustments the authors mentioned were 23 and 39 years ago, allowing items that could substitute for others and removing house prices, which means no special recent controversy.
Inflation is why “Fed officials expected to make at least three big rate increases over the next few months” (Ana Swanson, The New York Times, May 25th). We have already had two such hikes, resulting in the federal funds rate still a historically low 0.75 to 1 percent, and Swanson, doubtless along with the Federal Reserve itself, has no firm timelines for the next, though the next meetings, scheduled for June 14-15 and July 26-27 per the Board of Governors calendar, seem probable targets. There is real disagreement on whether these raises will solve our current problem, as it is not the usual inflation situation but caused by pandemic-related demand coupled with unusual supply problems, but the Fed is under bipartisan pressure to “do something,” and this is the only something they know.
We also need to keep in mind “What Higher Interest Rates Could Mean for Jobs,” as on May 17th, also in the Times. Author Lydia DePillis concluded implicitly that they wouldn’t mean much at all, as “job losses would have to mount considerably before workers would have a hard time finding new positions, given the backlogged demand,” about 740,000 additional people must be hired every year to support house building, commercial construction is behind and in demand, and an outplacement company president reported that “a lot of our customers are trying to avoid the ‘fire and rehire’ playbook of the past.” Therefore, in these areas and doubtless others, lower sales will not even eliminate shortfalls.
What is a recession? Per Oxford Languages, it is “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.” Even though the definition does not include employment, it would still require, from here, demand to significantly drop and stay lower. Could that happen, with that now widely outstripping supply and healthy hiring and job creation? Well, “A Harvard economist says the economy looks bad right now, but a recession isn’t a sure thing. It all depends on these 2 factors” (Tristan Bove, Fortune, published in Yahoo Finance, May 12th). Except for stock market activity, which since the publication date has been up and down instead of “crashing,” with 3.6% adjusted unemployment and household wealth strong it’s hard to defend that “the economy looks bad.” This professor’s two things are consumer activity, already another good aspect of how we are doing, and his expectation that gasoline prices, due to higher production and large releases from the American strategic reserve, will fall. Easy. With there being no reason for jobs to go away, and in turn for consumer demand to plummet, I see almost no chance for a recession, by definition and in spirit.
Even further out is stagflation, described in Investopedia as being “characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e., inflation) … alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP).” We have the third component, but where are the chances for the first two? Still, “Ben Bernanke sees ‘Stagflation’ Ahead” (Andrew Ross Sorkin, The New York Times, May 16th). Bernanke, a former good Fed chair, should know better, and maybe he does, as in the text he is only quoted as saying something could happen that “you could call” stagflation. Perhaps, as he suggested, 4% unemployment (“up a little bit”) and 5% inflation (dropping due to fewer people working) would qualify. If so, we spent most of the prosperous 1960s in stagflation.
Finally, could it be that “The Era of Cheap and Plenty May Be Ending” (Jeanna Smialek and Ana Swanson, The New York Times, May 3rd)? “The answer could hinge on whether a shift away from globalization takes hold,” although then we might have “more resilient, more robust supply chains,” something on the list of corporate managers all over. With plenty of international connections still functioning well, changes seem likely to be incremental instead of fundamental, and for now, per the above, our country is not in long-term economic trouble either. So, as with the other possibilities, let’s not worry about developments with minimal or nonexistent chances. Inflation is real, and we need to continue reducing it, but recession, stagflation, and few low-priced goods are not worthy of your attention. We have enough to worry about.