I enjoy skewering the mainstream media for “talking down the economy” which is a practice they condemned back in 2000. But all signs point to a slowdown in this red-hot economy which has led the Federal Reserve to target a soft landing.
I’m no economist, but I found this article by John Sumser quite interesting. His take on the economy is one I have not heard (emphasis mine):
The veterans, burnt by the dot com bust and the post 911 recession will argue that business will contract and layoffs will ensue. That’s the prototypical recession profile. Everywhere you turn, this scenario is forecast or implied.
Or, there may be a different scenario.
The people who used loose credit to finance the expansion of their lifestyles may have been unintentional evangelists of a new form of inflation. One way of thinking about the folks who “got in trouble” is that they were wrestling with an unmeasured form of inflation. Because there was no way to engineer the raises required to keep up, the second best source of income was real estate equity. Rather than “large living over spenders”, perhaps these folks were just doing what they thought it took to stay even.
Although the press is beginning to demonize people who financed their lifestyles on second mortgages, the question is “what are they going to do without a funding mechanism?”
I think they’ll be asking for raises and when they don’t get them, they’ll be changing jobs.
Imagine this trend in conjunction with a mass departure of the Baby Boomer generation. The implications on retention, hiring and wages would be beyond significant.