The Fed has obviously been winning its war against inflation.
That’s good news. The problem is that it has been at the cost of a deterioration in
economic growth, and particularly in some of the labor markets. We need to continue to see the resiliency that has marked this whole cycle.
We think a lot of many elements of that resiliency are in place.
The banking system is in extraordinarily good shape.
We look at things like tier one capital ratios, which are measures of how much of a hit bank banking can take and still keep lending and still be construct great shape. There. We see the consumer aggregate in good shape. And then finally we’ve had this labor shortage, which has been very, very helpful in terms of we’ve had more job openings of job seekers every month. Month in month out for the last several years, some of those job seekers have been finding jobs that’s continued to support the economy That’s coming into balance more.
We believe that shortage has also made employers very reluctant to lay off workers because they might have trouble refilling those positions if needed. At some point we believe there’s a risk that employers will will rethink that and be more willing to lay off. But for now, those three elements of resiliency are largely in place and should continue to support the economy. Here’s our hope. When we get through the election that lifts uncertainty, we’ll see the Fed on a clear, easy path.
We think that that will help businesses be more comfortable with making some of the investment plans that they’ve been putting off due
to the high levels of uncertainty. Even if we do hit a recession, we think it’s gonna be extraordinarily short and shallow by historic standards. So I think it’s okay for business owners to start looking beyond and start looking for trends that are going to impact the long-term prospects of their business.
