NRF points to economy’s underlying strength
By Alan Wolf, YSN
Despite last week’s dire warning by JPMorgan Chase CEO Jamie Dimon of an impending economic “hurricane,” the world’s largest retail trade association is dismissing fears of a major financial cool-down.
According to the National Retail Federation’s (NRF’s) chief economist, Jack Kleinhenz, continuing growth in employment, wages and consumer spending make it unlikely that the Federal Reserve’s inflation-taming efforts will backfire into a major setback for the economy.
Writing in NRF’s Monthly Economic Review for June, Kleinhenz acknowledged the unprecedented backdrop of supply chain disruptions, a land war in Europe, rising interest rates and budget-busting inflation. But describing the Fed’s actions as a “rebalancing,” he pointed to the economy’s underlying strength, as reflected in key first-quarter financial barometers including consumer spending (up 3.2%); business investment (ahead 9.2% year over year); and wage hikes averaging 5%.
Other key metrics he cited include historically low unemployment, pegged at 3.6% in April and May; the addition of 390,000 jobs last month; and a 6.4% spike in retail sales in March.
“Though many people fear an extreme cooling off of the economy, there is not an overwhelming amount of evidence to support such predictions,” Kleinhenz wrote. “In general, the data suggests that we remain in an ongoing expansion.”
Nevertheless, the NRF economist acknowledged a shift in consumer spending from goods to services as Americans reemerge from their COVID cocoons, and the “tricky job” the Fed faces as it addresses inflation by making borrowing more costly. “This is an extraordinary period with unprecedented factors,” he said. “There’s good reason why businesses, consumers and policymakers alike all feel uneasy.”