Economic Predictions Gone Wrong
The conventional wisdom from America’s economic pundits has been proven wrong once again. At the start of the year, many predicted that Trump’s tariffs would lead to a surge in inflation and potentially trigger a recession. However, the latest Consumer Price Index (CPI) numbers released by the Bureau of Labor Statistics (BLS) tell a different story.
Inflation Numbers Defy Predictions
The CPI numbers showed that inflation rose by 2.7% year-over-year, which is lower than the predicted 3.1% by Reuters’ polling of private economists. Core inflation was even lower at 2.6%. This is a significant deviation from the predicted numbers, and it’s a clear indication that the pundits were wrong.
Understanding the Inflation Numbers
It’s essential to understand that year-over-year inflation numbers include inflationary pressures from the end of Biden’s presidency, which can be misleading. A better gauge of current inflation is to look at the numbers over the last two months, which came in at 1.2% annualized. This is well below the Federal Reserve’s 2% target.
The Impact of Tariffs
The tariffs imposed by Trump were expected to push prices up, but their impact on overall inflation is minimal. The tariffs only apply to a small fraction of goods and services sold in America, and their effect on inflation is limited to a one-time rounding error. Inflation is fundamentally a monetary phenomenon, and the underlying inflationary impulse from money supply interacting with money demand is what drives inflation.
GDP and Recession Predictions
The pundits also predicted a recession, but the GDP numbers tell a different story. The GDP soared 3.8% in the second quarter of this year, and the Atlanta Fed’s "Nowcast" of third quarter GDP is a still-impressive 3.5%. This is not a sign of a pending recession, but rather a thriving economy.
Jobs and Employment
The labor market is also doing well, with the economy generating about 166,000 jobs a month during Biden’s last year in office. Under Trump, the economy has generated about 50,000 jobs a month, which is a decline. However, much of this decline is due to a decrease in federal employment. The bigger story is that employment by foreign-born workers has fallen by about 100,000 a month under Trump, which is a result of enforced immigration laws and a secured border.
Wages and Affordability
The median real wages, which stagnated during the Biden presidency, are now rising at a 1.6% annualized rate. This is a significant improvement, and it’s a result of rising wages and plentiful private-sector jobs. This is how you address "affordability" and prosper American workers.
Conclusion
In conclusion, the economic predictions made by the pundits have been proven wrong. Inflation is under control, GDP is thriving, and the labor market is doing well. The tariffs have had a minimal impact on inflation, and the economy is not heading towards a recession. The rising wages and plentiful private-sector jobs are a testament to the fact that the economy is doing well, and it’s time to acknowledge that the conventional wisdom was wrong.
