Economic Take

The Federal Reserve has clearly communicated its goals for months. So why hasn’t it changed course in the face of the latest inflation readings?

A peculiar thing happened in January’s jobs report. The labor force grew by 1.4 million, but after an annual population adjustment, the labor force actually contracted. Why does BLS change the measurements, and how does that affect the way we look at trends?  

The upcoming rise in interest rates has the markets unsettled. But the Federal Reserve’s plans are colored by a bullish view of the economy’s growth, not a hawkish outlook wary of an economic downturn.    

With the Fed already starting to pull back from pandemic supports, interest rates are expected to climb in 2022. While that may dampen mortgages, enough other changes over the past few years should leave housing in a healthy place. 

When it comes to inflation, it takes two to tango—aggregate demand and aggregate supply. Comparing prices to the pre-pandemic world of 2019 tells a remarkably different story than a one-year lookback. 

In our 2022 Business Leaders Outlook survey, we found that business leaders across the U.S. have a rosy view of the year ahead. While pandemic-driven challenges linger, they’re not really getting in the way of growth and profits.

It may not feel like it with the market trending down in the last month, but in 2021 we witnessed a remarkably fast economic recovery. And there’s good reason to be upbeat for 2022.

The economy is expected to grow steadily in 2022, but there are a few reasons that shouldn’t worsen current pricing pressures.    

The Fed’s ultimate goal of stable inflation requires aggregate demand to align with aggregate supply. That hinges on the supply of labor, and unemployment is the best measure of that alignment.

Even though we know the culprit behind inflation, we’re still susceptible to superstition. We tend to link inflation headlines with monetary and fiscal policy actions. Jim debunks a few popular misconceptions about recent Fed activity.

The air travel industry never shut down during the pandemic, but it certainly felt the effects. Airline trends offer us fast insight into business travel and tourism patterns. As COVID-19 cases dip and passenger counts rise, it looks like smoother skies are ahead.  

Though the Federal Reserve keeps an eye on asset prices, it won’t set targets. That’s because mandates on inflation and employment mean the Fed’s plate is plenty full.  Plus, a look at historical norms and why they may not apply to modern asset  valuations. We want to hear from you! We’re looking to learn more about listeners of Economic Take to improve and evolve the podcast. jpmorgan.surveymonkey.com/r/economictake  

Jim is joined by J.P. Morgan healthcare expert Lauren Ruane to discuss trends in the healthcare sector and what’s changed in the pandemic. Key themes include how technology and innovation are shaping the sector’s future. Lauren also covers patients as savvy consumers, remote care and behavioral health taking center stage, and why the sector’s labor shortage is likely to intensify.

Though they’re both climbing, price increases on materials are outpacing hikes on retail shelves. That’s partially because labor costs matter more when it comes to consumer prices. We want to hear from you! We’re looking to learn more about listeners of Economic Take to improve and evolve the podcast. jpmorgan.surveymonkey.com/r/economictake 

The Fed is focusing on the average rate of inflation over time, rather than responding to current volatility and price pressures. Why is this change a big deal? It can help lessen policy uncertainty, and it sets a more reasonable standard to judge the central bank’s intentions. The change may also bring an end to the decline in the nominal interest rate levels that has weakened central banks’ policy tools. We want to hear from you! We’re looking to learn more about listeners of Economic Take to improve and evolve the podcast. jpmorgan.surveymonkey.com/r/economictake

Consumer sentiment is in a rut since this summer—and that can help us forecast future trends in the U.S. With some added historical perspective, consumers right now have it pretty good. We want to hear from you! We’re looking to learn more about listeners of Economic Take to improve and evolve the podcast. jpmorgan.surveymonkey.com/r/economictake

What we’re anticipating from the Fed for the next few years isn’t monetary tightening, but a gradual easing of monetary accommodation. And a few good reasons to downplay a slim September jobs report. We want to hear from you! We’re looking to learn more about listeners of Economic Take to improve and evolve the podcast. jpmorgan.surveymonkey.com/r/economictake  

October’s jobs report and profit reports will tell us plenty about the momentum in the market. And a rise in mortgage rates from their pandemic lows could be a boost for landlords. We want to hear from you! We’re looking to learn more about listeners of Economic Take to improve and evolve the podcast. It's just six short questions: jpmorgan.surveymonkey.com/r/economictake  

As the economy rebounds, the Fed’s not budging — a clear sign of the Fed’s rethinking since a decade ago. Also, a look at why air travel numbers are a signal for the broader economy.  

This year’s surge in housing prices doesn’t have much in common with the crisis from a decade ago. Behind it is a positive change in household buying power driven by lower mortgage rates and higher incomes.