Eric Winograd, Chief Economist, AllianceBernstein, gives the economy a letter grade ahead of the Fed meeting.
Transcript:
CAROLINE WOODS: I’d love to do a bit of an economic check-in, if you will kind of an economic report card heading into this Fed meeting. Broadly speaking, if you had to give the overall economy a letter grade in terms of how it’s faring right now, what would you give it?
ERIC WINOGRAD: So in outright terms, I would say from a level perspective, you’re looking at a B or something like that. Growth is slowing. It’s slower than it was last year, and I expect that consumption will continue to slow. There is a lot of uncertainty among households, and particularly those at the lower end of the income strata are showing some signs of stress. But the labor market has held in. Generally speaking, in aggregate, income is solid and that’s keeping things moving. Inflation has not come all the way back to the Fed’s target, but underlying progress is moving in that direction. So again, in outright terms it’s a B. Relative to expectations, it’s a lot better than that. If we had come into this year at the beginning of the year and said, hey, we’re going to face the possibility of a 15% universal tariff plus all the geopolitical risk, plus the policy volatility and federal layoffs and all of these other things, I don’t think very many people would have expected the economy to perform as well as it has.
CAROLINE WOODS: OK, so you talk about the labor market being stable. What letter grade would that be?
ERIC WINOGRAD: Again, a B. The labor market looks like it’s just kind of hanging out in equilibrium. We’re adding jobs at a remarkably steady pace given the volatility in terms of policy. Wage growth is still comfortably beating inflation in aggregate. It’s normalizing. It’s at a level that’s close to being where the Fed would want it to achieve the inflation target over time. You are seeing some cracks emerge when people lose jobs, it’s taken them longer to find a new one. We are not seeing layoffs. So you can’t give it a poor grade. People aren’t losing jobs. It’s not accelerating, so you don’t want to give it an A. I’m just left with this idea of equilibrium average. Average is for grades these days.
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