The Weekly Wire: Rooting Against Atlanta | Orion
The article discusses the Philadelphia Phillies challenging the Atlanta Braves in baseball while focusing on the Federal Reserve Bank of Atlanta's GDPNow estimate of a surprisingly strong 2.8% Q3 US GDP growth, which complicates the Federal Reserve's efforts to slow inflation through interest rate hikes, potentially risking a recession and dampening stock market rallies despite the desire to avoid economic harm to American workers.
As I sit in my office in southeastern Pennsylvania, taking pen to paper on this week’s Weekly Wire, fall is in full bloom (or full foliage, I should say) and so is playoff baseball, with the upstart Philadelphia Phillies giving the Atlanta Braves more than they can handle in the National League divisional series. Before I get angry emails from any fans of the Atlanta Braves about the headline, let me say 1) I am a New York Yankees fan (getting a love for the Yankees from my late father who got to see the great Babe Ruth and Lou Gehrig play ball) and 2) this week’s headline isn’t weighing in against the Atlanta Braves but rather the Federal Reserve Bank of Atlanta, or more specifically, the Atlanta Fed's GDPNow “nowcast,” which, as of October 14, puts estimated Q3 GDP growth at a very – maybe even shockingly – robust 2.8%.
More specifically, if the US economy grew near 3% in the third quarter, it remains on very firm footing, which presents a real problem for the US Federal Reserve and, in turn, the US stock market. The Fed is desperate to see economic growth slow, and with it inflation, as it continues to confront historically high prices and continues to remind Wall Street that it won’t—and can’t—ease up on the pace of interest rate hikes until it sees clear and credible evidence that inflation is slowing.
That said, it is unlikely that an economy growing just shy of 3% is contemporaneous with a meaningful decline in prices and demand, particularly for labor (which won’t come as a surprise given September’s 3.5% unemployment rate). The longer the Fed must maintain an extremely hawkish monetary policy stance, the more likely it will go too far on the rate-hiking front and put the US economy into a recession, and the less likely it is that the stock market will enjoy a sustained rally. We are not rooting against the American worker, and we are not rooting for a recession – they do untold economic, emotional, and physical harm to millions of Americans, particularly to those more vulnerable communities and population cohorts. What we are rooting for is moderating inflation, a Fed that can credibly assume a less hawkish monetary policy stance, and an economic soft landing.