Those who are paid to worry, stew and fret have just about run out of items at which to point with alarm. Fear of the unexpected appears to be the last refuge for the masters of economic gloom for whom any exuberance is excessive.
The economy has cooled from a strong pace in the first quarter to give us a period of slow growth, price stability and modest wage gains.
Exhibit A last week was the June employment report released Thursday. Job growth was less than anticipated as service-industry hiring slowed down, the unemployment rate edged up to 5.0 percent from 4.8 percent in May and average hourly earnings, a measure of trends in labor costs, edged up 0.3 percent, which was less than expected.
The Conference Board’s index of leading economic indicators on the near-term future shows modest growth continuing.
That touched off a pre-holiday rally sending the market to record levels as bond yields dropped and investors bought financial stocks on the theory that the benign inflation outlook has ended, for now, the likelihood of interest rate increases.
On Wednesday, Federal Reserve policymakers did the expected–nothing. At their midyear meeting in Washington, the central bankers opted to keep short-term interest rates at current levels.
The next meeting is scheduled in roughly six weeks. The pessimists will have to strive hard to make a case for a rate increase, but something will catch their eye.
