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Looking At The Economy's Health


The economy is humming, but we may be hearing some sputtering as well. The stock market fell 3% this past Wednesday but later made back some of those losses. While in the bond market, a key marker of a coming recession has been playing out. Now the payoff for long-term government debt fell below the yield on short-term debt. So what are we looking for when the bell rings tomorrow? Catherine Rampell writes about economics for The Washington Post, and she joins me now. Welcome.

CATHERINE RAMPELL: Good to be here.

GARCIA-NAVARRO: So first off, I just want a gut check from you - Wall Street ups and downs, that warning flare in the bond market, but we're also seeing strong consumer spending at the same time. What is your take on these mixed indicators?

RAMPELL: I think the story thus far has been there are warning signs out there. Consumers have been the strong point. Up until this week, however, there was a consumer sentiment number that it was at its lowest notching since, I want to say, six or seven months. So that does suggest that consumers may be wavering a little bit. I think the bigger picture, though, is the global risks essentially. So right now, we have something, like, nine major economies around the world either currently in recession or on the verge of recession, and you could imagine that there would be contagion effects.

GARCIA-NAVARRO: What will you be looking for tomorrow and in the near term beyond tomorrow?

RAMPELL: I will continue to be looking at the economic data as they come out, of course some of these leading indicators, including things like business-consumer sentiment, durable goods orders, other things that are not exactly household names. I'll also, of course, be looking at the messaging that we're getting out of this White House and how equipped they are to deal with these latent risks.

GARCIA-NAVARRO: Which actually brings me to my next question - how equipped do you think this administration is?

RAMPELL: That is what I'm very worried about. The real risk, as I see it right now, is that we will have a badly mismanaged recession because, right now, this administration has made pretty clear that it doesn't have a plan. It never had a plan. In fact, colleagues of mine from The Washington Post on the news side - I'm on the opinion side to clarify - reported earlier this week that administration officials have done no planning for any possible recession because they don't want to feed a negative narrative.

GARCIA-NAVARRO: Well, that brings me to this, which is that President Trump has been aggressive in using his position to juice the economy. I'm thinking of how he has been pressuring the Fed. That is unusual, needless to say. But is it a tactic that could work?

RAMPELL: This is also very, very troubling. His political pressure that he's putting on the Fed is largely unprecedented at least for the last several decades. Historically, going back to about the early '90s, the executive branch, the White House in particular, has made a concerted effort to never comment on monetary policy because you need the central bank to be independent both in practice and in perception in order for its actions to be credible. And if people start questioning whether the Fed is making choices about interest rates, that undermines their ability to make those decisions and for those decisions to have their intended effect.

GARCIA-NAVARRO: You keep on using this word credible, and it just reminds me that so much about the economy is based on people's perception, people's confidence in not only the leadership but where the leadership is taking us, right?

RAMPELL: Yes, absolutely. These are sort of big institutional questions that I fear could endanger us the next time that we do have a downturn. And there will be a next time. The question is will Americans believe messaging coming out of their political and economic leadership but also confidence in leadership to make the right decisions and to make the right decisions for the right reasons?

GARCIA-NAVARRO: Catherine Rampell is a columnist with The Washington Post. Thank you very much.

RAMPELL: Thank you. Transcript provided by NPR, Copyright NPR.