The U.S. economy has something in common with baseball’s World Series, which finally got under way on Oct. 27. The series pits two good, but not great teams against each other: the Texas Rangers and the Arizona Diamondbacks, who made it to the Fall Classic by parlaying their Wild Card finishes through the postseason playoffs to their respective league championships.
Residential construction added just 0.1 percentage point to the third-quarter tally, while the contribution from nonresidential business investment was nil—the weakest showing since the third quarter of 2021. Government spending kicked in 0.8 percentage point. Together, those components comprise domestic final sales and total 3.6 percentage points. Another 1.3 percentage points came from inventory accumulation, while the trade balance trimmed a tiny 0.
With nominal GDP growing at the fastest rate since the mid-1980s, the Fed should be looking to raise its policy rate further, says Joseph Carson, former chief economist for AllianceBernstein. While the FOMC is certain to stand pat this week, “history shows it takes a fed-funds rate equal to or above nominal GDP to slow the economy, and the current target is still below” the year-over-year rate, he wrote on his LinkedIn blog.
That changed after what Barnes termed the Great Financial Recession, which he dates from 2007 to 2020. The Fed kept short-term rates at zero from 2010 to 2015 while nominal GDP averaged 4%. But inflation remained surprisingly subdued owing to moderate growth and wage pressures kept in check by workers’ worries about job security.
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