A warning sign of a weakening real economy has been spotted by the Federal Reserve’s Goolsbee. He still believes that the ‘golden path’ is possible, but there are some concerns to address.
While higher inflation has been observed this year, Goolsbee describes it as a blip or a bump in the road. He notes that when looking at the bigger picture, the arc of inflation is on a downward trend. Goods have returned to their pre-pandemic inflation levels, services are slightly higher but manageable, and housing remains a bit of a puzzle. Goolsbee explains that if European measures were applied to housing inflation, the rate would already be at 2%.
One factor contributing to the uncertainty is the unexpected increase in immigration compared to a year ago. Goolsbee urges caution when interpreting the non-farm payrolls number, as it may not accurately reflect the current economic situation.
Goolsbee emphasizes the need to remain flexible, as future actions will depend on how inflation progresses. Although the unemployment rate has risen slightly to 4%, he remains cautiously optimistic about the overall economic outlook.
The concerns raised by Goolsbee indicate a shift in his perspective, with a greater focus on potential inflation risks. As the economy continues to recover from the impact of the pandemic, monitoring these warning signs will be crucial in ensuring a stable and sustainable economic future.