“Crosscurrents” that are buffeting the economy bear careful scrutiny, particularly as policy uncertainty around the globe remains elevated, the vice chairman of the Federal Reserve told a group Thursday.
Speaking to a conference in Washington by the National Association of Business Economists (NABE), Fed Vice Chairman Richard Clarida noted that that the unemployment rate is near the lowest level recorded in 50 years, and average monthly job gains “have continued to well outpace the increases needed over the longer run to provide jobs for new entrants to the labor force.” Most measures, he said, of nominal wage growth are running at or somewhat above 3%, and recent wage gains have been strongest for lower-skilled workers.
He noted that the U.S. economy expanded at a robust pace in 2018 and that his baseline outlook for 2019 foresees somewhat slower but still-solid growth.
But he also sounded a muted caveat. “While my baseline outlook for growth, employment, and inflation is a positive one, a number of crosscurrents that are buffeting the economy bear careful scrutiny,” Clarida said.
He asserted that global growth is slowing, particularly in China and Europe, and that “global policy uncertainty remains elevated.” Financial conditions, he said, have been volatile, “making efforts to extract signal from noise more challenging.”
With regard to interest rates and monetary policy in this environment, Clarida counseled a balanced approach. “Going forward, we need, I believe, to be cognizant of the balance we must strike between (1) being forward looking and (2) maximizing the odds of being right given the reality that the models that we consult are not infallible,” he said.