The U.S. Economy Continues to Surprise the Experts, With a Major Reading on Inflation Due This Week to Add to the Noise

[Scott]

 

Last week, economists eagerly awaited the July monthly jobs report from the Labor Department.

 

This would be the first real test of the Federal Reserve’s anti-inflation monetary policy, following back-to-back 75 basis point hikes in interest rates designed to slow the economy by crimping demand and cooling off the labor market. Already, the second quarter gross domestic product had recorded a second consecutive contraction in output, a common though unofficial measure of a recession.

 

https://www.usnews.com/news/economy/articles/2022-08-08/the-u-s-economy-continues-to-surprise-the-experts-with-a-major-reading-on-inflation-due-this-week-to-add-to-the-noise

 

[candide]

An interesting question raised in the article: do current models still represent the current structure and behaviour of markets.

[Credo]

21 minutes ago, candide said:

An interesting question raised in the article: do current models still represent the current structure and behaviour of markets.

I am certainly not an economist but I think a lot of what's happening is outside traditional economic models.  The pandemic has simply messed up so many things in the economy.  There's things that are hard to get and thus more expensive and inflationary.  There are other things that are in abundance and thus relatively cheap.  A lot of the things that got stuck in transit for the past year or more has arrived at stores and are deeply discounted.   

 

Although Covid is starting to be more manageable, there are a lot of people that left the work force, retired or died.  Of those working, the danger still lingers and a lot of people are having to take sick time and that stresses businesses.   

 

Then just to throw the models into further disarray, there is the interruption of energy supplies from Russia.   I suspect it is going to take some time for all this stuff to sort itself out and for everyone to figure out where the economies of the world are headed or where they are going to land.   

Edited August 8, 2022 by Credo