Wall Street Is in Denial Over the Economy
Everyone, from corporate CEOs to investors, is too focused on the still decent nominal data when the inflation-adjusted numbers tell a more dire story.
The US economy is weaker than believed.
Photographer: Paul Yeung/Bloomberg via Getty Images
We know that the US economy is currently weak, but the real economy is really weak, and the Federal Reserve’s commitment to precipitate a recession to curb high inflation will make this reality obvious to seemingly oblivious investors.
Real gross domestic product dropped for two consecutive quarters, and although the National Bureau of Economic Research has yet to declare that a recession is underway, those who concentrate on nominal numbers, uncorrected for high inflation, still hope that a business downturn can be avoided. They talk about rising wages in a tight labor market with low unemployment and job openings exceeding the number unemployed. Hourly pay in nominal terms is up 8.8% since May 2021.