An economic report card ahead of the next Fed decision

Eric Winograd, Chief Economist, AllianceBernstein, gives the economy a letter grade ahead of the Fed meeting.

Transcript

00:00Kind of broadly speaking, if you had to give the overall economy a letter grade in terms of how

00:05it's faring right now, what would you give it? So in outright terms, I would say from a level

00:09perspective, you're looking at a B or something like that. Growth is slowing. It's slower than

00:15it was last year, and I expect that consumption will continue to slow. There is a lot of uncertainty

00:20among households, and particularly those at the lower end of the income strata are showing some

00:25signs of stress. But the labor market has held in. Generally speaking, in aggregate, income is

00:30solid, and that's keeping things moving. Inflation has not come all the way back to the Fed's target,

00:34but underlying progress is moving in that direction. So again, in outright terms, it's a B.

00:40Relative to expectations, it's a lot better than that. If we had come into this year at the beginning

00:45of the year and said, hey, we're going to face the possibility of a 15% universal tariff, plus all the

00:50geopolitical risk, plus the policy volatility and federal layoffs and all of these other things,

00:54I don't think very many people would have expected the economy to perform as well as it has.

00:59Okay, so you talk about the labor market being stable. What letter grade would that be?

01:03Again, a B. The labor market looks like it's just kind of hanging out in equilibrium, right?

01:07We're adding jobs at a remarkably steady pace, given the volatility in terms of policy.

01:13Wage growth is still comfortably beating inflation in aggregate. It's normalizing. It's at a level that's

01:19close to being where the Fed would want it to achieve the inflation target over time.

01:23You are seeing some cracks emerge. When people lose jobs, it's taking them longer to find

01:28a new one. We are not seeing layoffs. So you can't give it a poor grade. People aren't losing

01:33jobs. It's not accelerating, so you don't want to give it an A. I'm just left sort of with

01:37this idea of equilibrium, average, whatever average is for grades these days.