If you’re uncertain about whether or not the U.S. is in a recession, you’re asking the wrong question, according to a Federal Reserve representative.
According to Neel Kashkari of the Federal Reserve Bank of Minneapolis, “whether we are technically in a recession or not doesn’t change my assessment.” “I’m focused on the inflation data. I’m focused on the wage data. And so far, inflation continues to surprise us to the upside. Wages continue to grow.”
Last month, the inflation rate reached a four-decade high, increasing 9.1% from a year ago. But the labor market is still strong Employment among all workers except those who work on farms increased by 372,000 last month, alongside a low national unemployment rate of 3.6%.
Earlier this week, Labor Department data pointed to signs of a downturn in the job market. Newly jobless claims have risen to their highest level since November, however. Nonetheless, Charles Couch, bank supervisor, remarked that the job market is still very, very strong.
Typically, a recession would mean high job losses and high unemployment, which are awful for American families. We’re not seeing anything like that,” he said.
The problem, according to Kashkari, is that even in a strong job market, inflation is outpacing wage growth — giving many Americans a functional real pay cut. The Federal Reserve’s top priority right now is solving that problem, he added.
We’re committed to doing our work, and whether we’re technically in a recession or not doesn’t change that, Kashkari said.
The Bureau of Economic Analysis reported on Thursday that the country’s gross domestic product went into a back-to-back decline, a warning sign that usually accompanies a recession. For Kashkari, that’s actually good news: the economy is about to slow down, which will drive down inflation and make it no longer outpace wage growth.
We want to see a slowdown, he said. We don’t want to see the economy overheating. We would love it if we could transition to a sustainable economy without tipping the economy into recession.
It’s a significant challenge for the Fed. Kashkari acknowledged that economic slowdowns tend to be very difficult to control, and especially if it’s the central bank that’s inducing the slowdown.
Still, he said, the bank will do whatever is necessary to tame inflation.
We’re going to do everything we can to avoid a recession, but we are committed to bringing inflation down, and we are going to do what we need to do, Kashkari said.