This economy is perplexing experts. Here’s why.
What do Federal Reserve Chair Jay Powell and the CEO of railroad CSX have in common?
Neither of them knows what the heck’s happening in this economy.
During an earnings call on Tuesday, CSX head James Foote said: “Both global and U.S. economic conditions have been unusual this year, to say the least. The economy right now is the most puzzling I have experienced in my career.”
And coming from somebody who’s been in the railroad business for more than 40 years, that’s saying something.
The economy is always complicated, which helps keep economists — and journalists — in jobs.
But even experienced folks say we’re getting some mixed signals right now.
“I think the things that are puzzling in the economy aren’t really anything sudden or new. They’re continuation of puzzling trends,” said Ben Page, a senior fellow at the Urban-Brookings Tax Policy Center.
He points out two things in particular.
In financial markets, the puzzle is interest rates. Usually, when things are going well, interest rates go up.
“We’ve had an economy that’s performing at a high level,” Page said. “And yet financial markets seem to think that interest rates are going to fall.”
The second puzzle is what’s happening with inflation. With such low unemployment, economists would normally expect higher wages and higher prices.
But that’s not what we’re seeing, according to Larry Mishel of the Economic Policy Institute.
“Wages are starting to grow a bit faster. They’re growing faster than inflation, but they’re not growing as fast as we might expect with unemployment below 4 percent,” he said.
On top of those puzzles, there’s the trade war. That’s VERY relevant to CSX, which ships cargo for business that are feeling the tariffs.
“That’s, I think, the environment that creates anxiety in businessmen — the uncertainty of not exactly knowing what the outcome of these disputes will be, said Oscar Jorda, an economics professor at the University of California-Davis.
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