Philadelphia Chapter November Meeting!
Paul R. Flora, Director of Regional Economic Analysis at the Federal Reserve Bank of Philadelphia, presented Critical Questions in an Age of Economic Uncertainty. His remarks reflected his own views.
- The economy kept growing even as hiring stalled. Real GDP growth came in stronger than forecasters expected, while payroll employment was up just 0.3% year over year in September. The forecasters cited in the presentation expected GDP growth to slow.
- Unemployment rose gradually, and recession signals remained mixed. Unemployment reached 4.2% in September, up roughly one percentage point over three years. Flora highlighted how unusual it was for unemployment to rise that slowly without a recession and asked whether gig work could be masking some labor-market stress.
- Inflation and affordability continued to weigh on households. Inflation remained above the Fed’s target, and homes, autos, and health care were increasingly difficult to afford. Businesses expected stronger price increases while their wage expectations held steady.
- Consumer confidence had eroded since the 2021 rebound. Flora raised the question of how long household spending could remain resilient as consumers faced high prices and a softer job market.
- AI investment was a major uncertainty in the outlook. Flora questioned whether the pace of AI investment was sustainable and how much a pullback could slow GDP growth. Tariffs and geopolitical developments added to the uncertainty.
- The Fed held its policy rate steady. The presentation noted that the October 28 decision kept the federal funds target range at 3.75%–4.00%, with inflation still elevated and domestic spending and capital investment holding up.
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