The economy is doing really well

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In a widely watched speech at the Economic Club of New York, Fed Chairman Jerome Powell delivered a similar message to climate protesters who briefly interrupted him: It’s too hot.

Powell spoke about the U.S. economy, which has barely missed a yawn despite the heavy doses of melatonin the Fed has given it by raising interest rates.

In his remarks, Powell said that “inflation is still too high” and left the door open for another rate hike in December – although he effectively ruled out one at the central bank’s November meeting.

Over the past 20 months, the Fed has raised interest rates to a 22-year high to curb rising inflation. And inflation has fallen to about half of its June 2022 peak.

But the economy is still booming

The Fed’s extravagant rate hike was expected to slow hiring, spending and overall economic growth as unfortunate side effects of the inflation balloon bursting. However, a number of recent reports show that the US economy is still booming in the 1920s:

• Jobs: Employers beat expectations by adding 336,000 jobs in September and the unemployment rate remains low at 3.8%.
• Expenditure: Retail sales also topped estimates in September, a sign that American consumers remain the undisputed shopping champions of the world. This likely helped: Americans’ wealth rose 37% from 2019 to 2022, according to Fed data released Wednesday. That’s more than double the second-highest increase on record.
• Business: After reporting strong retail sales this week, Morgan Stanley raised its forecast for third-quarter economic growth to 4.9% from 4.5%. Context: A year ago this week, Bloomberg economists predicted a 100 percent chance of a recession…within a year.

Big picture: Powell emphasized that none of his plans had been written in Sharpie “given the uncertainties and risks” of the current situation. One of these question marks: the Israel-Hamas war. Powell warned that “sharply heightened” geopolitical tensions pose “significant risks” to the global economy. – NF