Stubbornly High Inflation and Wobbly Jobs Market Pose Threat to U.S. Economy

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Inflation,Jobs Market,U.S. Economy

Bank of America's chief market strategist warns that stubbornly high inflation and a wobbly jobs market are combining to pose an ominous threat to the U.S. economy, shifting the narrative from 'Goldilocks' to 'Stagflation.' Recent data indicates that higher prices may be more durable than expected.

Stubbornly high inflation and a wobbly jobs market are combining to pose an ominous threat to the U.S. economy, Bank of America's chief market strategist, Michael Hartnett, warned. The result is a narrative of 'macro shifting from Q4/Q1 'Goldilocks' to Q1/Q2 'Stagflation,' Hartnett said in his weekly 'Flow Show' note to clients dated Thursday. Stagflation refers to low economic growth and high inflation, a condition that hammered the U.S.

economy in the 1970s and occasionally has popped up over the years but hasn't lasted long, particularly because inflation had been so low for so long. However, recent data has indicated that higher prices may be more durable than many economists and Federal Reserve officials had figured. Data this week on the consumer and producer price indexes surprised to the upside, and a New York Fed survey showed longer-term inflation expectations are on the rise. As Hartnett indicated, the U.S. closed 2023 with the labor market looking strong and GDP posting a solid 3.2% gain. However, gross domestic product growth is tracking at just a

 

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