A 'Hard Landing'?--Part II

 Popular Economics

“The number of job openings was little changed at 7.1 million in August, the U.S. Bureau of Labor Statistics reported today. Hires changed little at 5.2 million, while total separations were unchanged at 5.1 million. Within separations, quits (3.1 million) were unchanged, while layoffs and discharges (1.6 million) were essentially unchanged.” BLS.gov

FREDjolts

Will the federal Reserve engineer a hard or soft landing in this new rate hike cycle just beginning? A soft-landing is possible, but something has to be done about the rapid rise in interest rates.

The last time the Fed acted to tame inflation was during the post-COVID-19 pandemic recovery when CPI inflation had reached 9 percent.

But it worked. There wasn’t another recession and the economy has had five years of continuous growth since then, in large part because of the bipartisan recovery aid, including personal checks paid to almost all Americans.

More than $5Billion was invested in the recovery from the worst recession since the Great Depression.

Can the Fed do a repeat performance under new Fed Chair Kevin Warsh, an actual economist?

The just released JOLTS report shows that better economic growth is ahead, even with the Fed’s first rate hike since 2024. The actual unemployment report is due and will give more clues—such as whether hiring picks up.

So the hard landing scenario—which is an engineered recession when the Fed holds interest rates too high for too long--I believe is less likely, even though bond interest rates are the highest in 20 years; a danger single that credit conditions are tight for both businesses and consumers.

The Jobs Openings and Labor Turnover survey shows the number of job openings has been gradually increasing from its low of 6.55 million openings last December and is now 7.1 million.

There were 5.2 million hires and 5.1 million separations (i.e., quits), thus approximately 100,000 net new jobs were possibly created in August. This should be positive news for the upcoming August unemployment report.

If higher job formation continues, consumers will spend more despite the Fed’s actions to raise their higher borrowing costs. Consumers aren’t feeling good about the cost of anything since the Iran war.

They will need a confidence boost. They aren’t very happy per the latest Conference Board survey.

“The Consumer Confidence Index deteriorated notably in September, following two prior months of softening,” said Dana M Peterson, Chief Economist, The Conference Board. “The Present Situation Index fell sharply, while the Expectations Index slipped further into negative territory.”

But higher job creation numbers might do the trick and allow a soft landing, especially if the A.I. build out will create the good jobs that are needed to run the new economy.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

More Economic Growth?--Part II

Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 1.5 percent in the second quarter of 2026 (April, May, and June), according to the second estimate released today by the U.S. Bureau of Economic Analysis (BEA). In the first quarter, real GDP increased 2.1 percent.” BEA.gov

FREDgdp.

I don’t believe a recession is near, I said last week. The five-year cycle of economic growth begun with the recovery from the Covid-19 pandemic could continue.

For how long? The longest growth cycle to date was during the Obama and Trump I administrations—2009 to 2020 (see above graph). And that was because of the massive government spending to bring U.S. out of the 2008-09 Great Recession.

This is despite Trump’s economic wrecking ball that has reduced nonfarm payroll formation to just 31,000 per month over the past year and canceled or reduced many of President Biden’s bipartisan bills that boosted investment in infrastructure, healthcare, environmental protection, and healthcare services.

And what about the Fed’s rate hike(s)? Barron’s Randall Forsyth reports that interest rate markets believe the Federal Reserve risks causing a recession, or stagflation at least, by raising its Fed Funds rate +0.25 percent one to two more times to fight very stubborn inflation.

That is why economic growth slowed to 2.1 percent and 1.5 percent in Q1 and Q2 this year that the Fed could further damage because of its hawkish rhetoric on inflation.

But something remarkable is happening that could pull Americans away from the precipice. The Atlanta Fed’s GDPNow estimate of third quarter GDP growth is 5.1 percent for the second consecutive month, above most economists’ predictions.

Why? Consumers and governments are on a spending spree, and some $800B is being invested in the construction of A.I. data centers blanketing the country where many Americans don’t want them.

This is while corporations have record profits, which will extend the record stock market run whose prices are already in nosebleed country. The Price-to-Earnings ratio of the S&P 500 is 28 to 1, already far above its long term 15 to 1 historical ratio, according to economist Robert Shiller of irrational exuberance fame.

Trump and Republicans can’t do much more damage to growth. Their policies are failing at almost everything they attempt. Trump’s signature tariffs are illegal and require refunding, which will aid the bottom line of corporations and lower the prices of such as Target and Walmart.

He has failed to win the Iran war, and the world is finding ways to work around the consequent energy shortages. And renewable energy sources are making a comeback.

The Japanese have even agreed to build small nuclear reactors and two huge natural gas energy projects in the Midwest and South.

Consumers haven’t stopped spending, either. Surprisingly, American retail shoppers are out in force again with the 1.2 percent August sales increase. Many consumers seem to be recovering from the shock to energy prices since the beginning of the Iran War.

And maybe payroll hiring will continue to improve with the 166,000 additional hires in August. But the bottom line is the Iran war must end as well, and everyone knows it.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

Will It Be a 'Hard Landing'?

Popular Economics

“The US LEI receded slightly in August, the first monthly decline since March of this year,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Four out of ten components fell compared to the previous month, with consumer expectations remaining a significant strain on the Index.”

 

LEI

Does the new Fed chairman want to be another Paul Volcker, whose Board of Governors raised the Fed Funds rate to 20 percent to cure the stagflation surge of the 1970s? We don’t need another ‘hard landing’, the economic term for an engineered recession.

New Fed Chair Kevin Warsh said at the most recent FOMC meeting that the Fed would do what it takes to restore confidence in the Federal Reserve to fulfill its mandate of low inflation with maximum employment.

And to make its point the 12 Fed Governors voted unanimously to raise their Fed Funds rate +0.25 percent, thus raising the Prime Rate from 6.75 to 7.00 percent that governs most installment loan and credit card rates.

So the surge in August retail sales might not be a good thing, as much as consumers would like to celebrate another good holiday, since how is the Fed to bring down inflation otherwise when consumers are a major cause of it?

The core personal consumption expenditure index—the version of the Fed’s preferred inflation measure for consumers that excludes food and energy prices—has exceeded the Fed’s 2% target for over 60 months.

The Conference Board’s Index of Economic Indicators (LEI) that attempts to predict future growth has been flashing signals of a slowdown for months per its graph above (downward slope of blue line).

But even the tariffs and Mideast wars haven’t slowed down consumer spending enough. The Fed is saying that it has waited too long to act to bring down inflation, which is endangering economic growth and the U.S. currency.

Chairman Warsh also said five years was too long to wait for the inflation rate to return its 2 percent target rate because of the tariffs and Middle East unrest. It was last this low during the COVID-19 pandemic.

Of course, “The odds of a serious Fed policy mistake are uncomfortably high and rising,” warned Mark Zandi, chief economist at Moody’s Analytics, in a post on X, I quoted last week.

Barron’s Randall Forsythe cites David Rosenberg of Rosenberg Research on what can be the most dangerous mistake, “Unless oil prices come down quickly. The only way by which interest rates bring inflation back to the 2% target is “by destroying enough demand to offset the supply loss. That is a recession by design,” he concludes.

Economists call it a ‘hard landing’. And that has always been the dilemma; how can the Fed boost interest rates just enough to engineer a ‘soft landing’, which means bring inflation back down to its long-term average without causing a recession?

This is the rock and a hard place I’ve been talking about. It can’t be done without real pain.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Not Another Greenspan?

 Popular Economics

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent on a seasonally adjusted basis in July after falling 0.4 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.” BLS.gov

FREDcpi

Kevin Warsh, the new Federal Reserve Chairman sounded hawkish in his first speech at the Fed’s annual Jackson Hole conference, as if an interest rate hike was needed soon to fight rising inflation.

"While the PCE and CPI (inflation) readings were better than expected, they do not tell me that underlying trends have meaningfully improved, and we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do."

But Warsh is a true-red Republican appointed by President Trump and we know that Trump wants to keep interest rates as low as possible to pay for the tariffs and war he has started and will go at any lengths to make it happen, including attempting to fire Fed Governors (Lisa Cook).

Good luck is all I can say. Warsh confronts a scenario that is frighteningly similar to that of Alan Greenspan’s tenure as Fed Chairman in early 2000. President GW Bush needed ultra-low interest rates to pay for his wars on terror after 9/11. But he also passed huge tax cuts that Republicans didn’t want to pay for.

And Greenspan worked to assist him in financing the invasions of Iraq and Afghanistan by convincing his Fed Governors to hold down interest rates for as long as possible—too long it turned out. The Fed Funds rate was held at 1 percent while CPI inflation was ultimately rising to 5.3 percent by 2008, igniting the housing bubble that ultimately burst, thus creating the Great Recession.

Maybe Greenspan was at heart an inflation dove, because the Fed got behind the inflation curve and didn’t raise its Fed Funds rate to 5.25 percent until 2006, which was too late to stop the housing bubble and soaring inflation.

So does Chairman Warsh’s pronouncement that inflation will be tackled, no matter the consequences, to be believed? The Fed Governors have been sounding equally hawkish on the need to fight inflation. And "short-term interest rates are predominant tool to achieve the dual mandate," said Warsh (i.e., stable prices and maximum employment).

Yet U.S. debt is growing faster than the economy, and the job market is barely growing. A.I. won’t be the savior if consumers run out of money because they no longer have a job. The BLS’s latest benchmark revision of payroll jobs estimate implied that non-seasonally adjusted nonfarm payroll gains averaged about 11,000 per month through March over the preceding 12 months instead of 18,000, reports Reuters.

So will Warsh and the Fed be able to withstand the merciless vituperation sure to come from the child-like brain of Donald Trump and maintain the inflation fight when the going gets tough?

We don’t want another bubble to burst with A.I.’s investment bubble growing every larger on top of the tariffs and endless wars.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Where's the Inflation?

Financial FAQs

“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East…Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.” FOMC

MarketWatch

New Fed Chair Kevin Warsh wouldn’t say when the Fed would join the chorus calling for a rate hike at his June press conference. He was waiting to hear from task forces studying problem! When have we heard this before?

The U.S. and Iran keep bombing each other, and Iran has just said they are in no hurry to negotiate another ceasefire, while Trump just found another way to keep tariffs high.

And the bond market and inflation indicators are showing higher inflation ahead. Is there any doubt that the Fed’s Fed Funds rate is going higher, as well, with the Fed’s FOMC statement mentioning “elevated uncertainty” re the Middle East conflict?

The financial markets didn’t like the Fed’s inaction, which is why the market indexes plunged after the FOMC statement—the DOW ended the day down by -1150 pts.

Yet economic disaster is staring Americans in the face, if Trump keeps raising tariffs and can’t stop his Gulf war. It cuts into consumer spending, raising the cost of everything when debt at all levels—national, corporate, and consumers are already at record levels.

Raising the Fed’s interest rate will slow rising inflation by slowing economic growth. The Fed FOMC conclusion that economic activity is “expanding at a solid case” was because of over investment in the AI build out of data centers, almost all of it borrowed money. And many of the AI investors are borrowing from and investing in each other, like Japan’s keiretsu system of interlocking ownerships that impeded them from writing off bad debts when their decades long economic stagnation occurred.

One ‘tell’ of the possibility of a US. recession is that huge new orders for computers and related products jumped 3.1% in June, the government said Monday in its monthly report on durable goods.

The last time there was such a surge in goods investment was during the dot-com era, according to MarketWatch’s Jeffry Bartash. “Over the past year, orders for the AI-related hardware have surged 17%, a level last sustained during the dot-com era more than a quarter of a century ago,” he said.

But the dot-com investments didn’t begin to show enough profit for decades to pay for the investments, hence the 2000 dot-com recession that Alan Greenspan and Nobel Laureate Robert Shiller predicted with their warning that irrational exuberance was blinding investors from reality.

Yet the Fed must act to raise rates sooner or later, since higher inflation is already embedded in consumer surveys, according to the University of Michigan’s sentiment survey:

“Year-ahead inflation expectations ticked down from 4.6% in June to a still-elevated 4.2% this month. The current reading substantially exceeds the 3.4% seen in February before the Iran conflict began, (my bold) along with all 2024 readings. Long-run inflation expectations held steady from last month at 3.3%, remaining a bit higher than the 2.8% to 3.2% range seen in 2024.”

The advance second quarter GDP growth estimate was just 1.5 percent, another casualty of the tariffs and Mideast wars despite the AI investment surge. It’s no wonder the Fed’s Governors are avoiding the obvious; when to begin to restrict credit before inflation becomes entrenched longer term, as it did in the 1970s.

What were the conditions then? Energy supplies were restricted, inflation soared, and economic growth stagnated. Hence the decade of stagflation. Is this a repeat?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

Another Housing Bubble?

 The Mortgage Corner

“WASHINGTON (July 9, 2026) – Existing-home sales decreased by 2.4% month-over-month and increased 2.8% year-over-year, according to the National Association of REALTORS® Existing-Home Sales report. NAR

FRED30yrmortgage

It’s been months since I last wrote about the housing market, and why it’s had such a slow recovery. FRED’s 30-year fixed mortgage graph tells us why, and why we have a housing shortage.

And the 30-year fixed rate mortgage has hovered above 5 percent since 2023, its longest stretch above 5 percent since 2007 and the start of the Great Recession. Lower interest rates would certainly stimulate more housing construction, especially on the affordable end.

But new Fed Chair Kevin Warsh has been repeating that inflation is too high at his congressional hearings and the Fed may have to make some hard choices and become an inflation hawk to bring inflation back to its 2 percent target rate.

If only we still had Ayn Rand disciple and free market lover Alan Greenspan as the Fed Chair! In a similar situation during the GW Bush 2000 decade, Fed Governors resisted raising the Fed rates to help fund the Bush administration’s wars on terror, despite enacting the large Republican tax cuts that caused the first $trillion in federal debt.

A caveat is to be careful what you wish for, since the last such building surge inflated the housing bubble for mostly the wrong reasons.

And the busted housing bubble that led to the Great Recession of 2008-09 also led to the current housing shortage. Can we ever return to the ‘good old days’ when there was enough housing for those that want to own?

It fueled an earlier housing bubble It was the combination of interest rates being held below rising inflation that caused housing prices to increase by double digits for a couple of years and we were left when a massive oversupply of unsold homes.

Right now we have both a demand and supply problem—how to bring down mortgage rates to lure more home buyers, and kick start more housing construction.

The Trump administration is also attempting to talk down interest rates in the face of its massive tax cuts as it has been waging war on several fronts—from attacking Venezuela to Iran, while again ballooning the federal debt.

The 30-year average fixed mortgage was last at a much more affordable 3 percent rate during the COVID-19 pandemic. It is 6.58 percent at this writing and has remained above 6 percent since 2022 when the Fed last raised interest rates to combat inflation as world economies began to recover from COVID.

And we know both home buyers and mortgage lenders are incredibly sensitive to mortgage rates, in part because mortgage lenders have kept credit standards much higher than they were in the lead up to the housing bubble that caused so many defaults. Anyone remember the no-income verification, liar loans of that time?

The National Association of Realtors remain hopeful that the home buyer market will approve.

"The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions,” said NAR Chief Economist Lawrence Yun. “However, job gains—more than half a million since the beginning of the year—will continue to provide support for the housing market.”

But so much is similar to the housing bubble and bust. Trump’s Big Beautiful Tax Bill and Iran war is raising the costs of everything as did Bush’s tax cuts and war on terror.

Are we seeing a housing revival with the slight uptick in existing home sales? Hope springs eternal, as the saying goes. Sales have hovered around 4 million residential units since the busted housing bubble and 2008-09 Great Recession. There has never been enough supply to satisfy the demand of an increasing population since then because the busted housing bubble restricted new home building for almost 10 years, and 30-year fixed rate mortgages have hovered above 6 percent ever since, per the FRED graph.

Higher interest rates are raising construction costs. Trump’s tariffs on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. This is while immigration enforcement is worsening worker shortages and delaying projects.

I said last week,

“We get so many things thrown at us in the construction industry,” said Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas. “It just seems like every time we turn around, we’ve got something else to fight.”

The bottom line is too many resources have been diverted to funding wars, not peaceful enterprises since then, leaving little room for more housing construction, or curing our homeless problem.

When will that change?

Harlan Green © 2026

Follow Harlan Green on: https://twitter.com/HarlanGreen

No Relief From Inflation

 Popular Economics Weekly

 “From the same month one year ago, the PCE price index for May increased 4.1 percent. Excluding food and energy, the PCE price index increased 3.4 percent from one year ago.”

 

BEA.gov

The Personal Consumption Expenditure Index (PCE), the Federal Reserve’s preferred inflation gauge that covers the widest spectrum of price changes, showed no relief in May. In fact, the PCE graph above showed inflation’s steady climb since Trump’s April 2025 Liberation Day (illegal) tariff hikes levied on the rest of the world that must now be repaid.

Refunding the tariffs to importers won’t reduce inflation because the higher import costs were passed on to consumers and producers. It becomes a chain reaction as those costs work through the economy. There are also the distributors, for instance, as well as the retailers and manufacturers’ profits that go into the chain.

The 4.1% annual inflation rate means inflation is now out of control for wholesale prices that go into the finished products as well. This is while Kevin Warsh, the new Fed Chairman, has said he is committed to bringing inflation back down to 2%.

When and how can it be done? We will be living with the likelihood the Fed may have to raise interest rates sometime this year. The Ukraine and Iran wars are creating more product shortages on top of the supply chain shortages caused by the tariffs.

The Ukraine war could be over if Trump had taken Ukraine’s side in the conflict instead of Putin’s. And how will he handle the Iranians who have the U.S. over a barrel (of more than oil) because he must bring down the price of oil-based products as well?

The U.S. economy is growing at 2% in the latest first quarter revision because consumers have kept shopping, but with a terrific toll on their personal savings rate (down to just 3%).

The financial markets have added to the frenzy because of the A.I. spending to expand data centers. There’s more than a little irrational exuberance prevailing, I said last week.

Their actions have raised consumer prices to such a level that they may not come down for years. We know this because the wholesale Producer Price Index (PPI), that measures the price of raw materials going into the finished products rose a whopping 1.1% in May, seasonally adjusted, also the largest rise in more than three years that must work its way through the product chain.

No, inflation is here to stay for a while, producing an immense asset bubble as the U.S. economy advances into the next stage of our industrial revolution. Economists have another term to describe it—creative destruction—that economist John Kenneth Galbraith said was,

“the cyclical process by which the system eliminates the people and institutions which are mentally too vulnerable for useful economic service. Unfortunately the process has larger and less benign effects, including the possibility of painful recession or depression.”

We are in this inflationary mess because of executive actions made on impulse rather than research by a President and advisors who are completely ignorant of  basic economic theory, who has said he likes the inflation and no longer cares about the economy.

Who will be the winners and losers in the A.I. economy to come at a speed that will upend the lives and jobs of the next generations?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen