The Covid-19 pandemic seems to upend the meaning of a lot of things — not least of all our perception of time. It feels like we’ve been talking about recessions for years now … and that’s not entirely untrue. Despite the economy’s resilience and its refusal to slide into a technical recession, consumers’ long-term inflation expectations increased to their highest level in 12 years, with Americans staying consistently worried about prices and becoming more uneasy about unemployment.
They might have a point. Economist Claudia Sahm created the highly accurate Sahm rule, which uses the unemployment rate as a recession indicator. But she created that rule in the previous times, and it might not prove true this time. “The pandemic was extremely disruptive, and the rebalancing of the economy has been messy and slow,” she writes. “That’s as true for inflation and supply chains as it is for the labor market.”
Conor Sen also has concerns about the labor market: “If you’re a Fed policymaker, you now have reason to believe that the labor market has rebalanced, which should reduce your concern about a wage-price spiral fueling inflation in the medium-term,” he writes, adding that “downside risks to employment now outweigh upside risks to inflation.” Fed Chair Jerome Powell probably didn’t ease worriers’ minds last week with his latest comments.
Anyway, John Authers said the recession is over — haha, not the one you’re thinking of. He’s talking about the one in profits made by companies in the S&P 500, and he reiterates that the corporate sector is not America’s economy. But “profits still look pretty bad given the apparent health of the economy, largely due to the pandemic’s continuing aftereffects on buying behavior,” he warns.
