New Normal or No Normal? How Economists Got It Wrong for 3 Years.
Summary
Americans are working in greater numbers than predicted, and recent retail sales data showed that consumers are still spending at a faster clip than just about anyone expected. President Biden then pushed Congress to approve several laws that provided funding to encourage infrastructure investment and clean energy development. As inflation showed staying power, officials at the Fed started to raise interest rates to cool demand — and economists began to predict that the moves would plunge the economy into recession. “But we don’t really know.” At the same time, fiscal stimulus has had more staying power than expected: State and local governments continue to divvy out money they were allocated months or years ago. Donald Kohn, a former vice chair of the Fed, said big government deficits and the transition to green energy could keep growth and rates higher by propping up demand for borrowed cash.