Frank Hawkins Kenan Institute of Private Enterprise
Kenan-Flagler Business School

inflation

Kenan Institute Economic Briefing: Soft Landing or Softening Economy?

Kenan Institute Economic Briefing: Soft Landing or Softening Economy?

Aug 4, 2023 • Video

Have the chances of a recession arriving in the next year decreased? Institute Executive Director Greg Brown laid out the conflicting economic indicators around this question and offered his analysis of the Aug. 4 employment report, which showed 187,000 jobs added in July. He also answered questions on the yield curve’s performance and the potential effects of Fitch’s downgrade of the U.S. credit rating.
Business Uncertainty

When Uncertainty Becomes a Certainty

Feb 2, 2023 • Commentary

2022 was a tumultuous year: NASDAQ, a tech-heavy stock index, closed the year down more than 30%; inflation proved more stubborn than policymakers initially thought and reached 40-year highs; Russia invaded Ukraine, sending commodity prices even higher; and central banks cranked up rates in response, the Federal Reserve raising interest rates at an unprecedented pace in recent history from around zero to over 4%. As we entered 2023, the global economy stood “on a razor’s edge,” the World Bank warned in its latest projections. Add to that a divided Congress with razor-thin majorities, political wrangling over the debt ceiling, and increasingly frequent catastrophic weather events, and it leaves one wondering where we are all headed.
Congress

Inflation Reduction in Name Only, but Still a Big Deal

Sep 28, 2022 • Commentary

It is probably not a mystery to even the most casual observer of political affairs why the historic climate, health care and tax bill signed earlier this month was dubbed the Inflation Reduction Act. Inflation is high and causing real problems for many households, and so if only Congress could legislate it away by enacting … This is not to say that the package does not deserve any enthusiasm; it is an impressive legislative feat, making significant, though imperfect, advances on health care and climate change. On the other hand, the effect it will have on inflation, its raison d’être in name, will be modest at best and occur only over time.
Kenan Institute Economic Briefing: Will the Fed Overshoot?

Kenan Institute Economic Briefing: Will the Fed Overshoot?

Sep 2, 2022 • Video

Kenan Institute Executive Director Greg Brown discussed the Federal Reserve’s next move after the Sept. 2 employment report showed slowing but still strong job growth. Brown predicted that the Fed, to protect its reputation as an inflation fighter, would more likely overshoot than come up short in using higher interest rates to tamp down rising prices. He also answered questions from the media on how the global nature of inflation limits the Fed’s effectiveness as well as what can be expected for local and North Carolina labor markets.
US Economy

Why a Shrinking Economy Won’t Make the Fed Blink

Jul 29, 2022 • Commentary

GDP, the broadest measure of economic output, contracted for the second straight quarter, stoking fears that the economy is already in a recession — and has been since the beginning of the year. But the guts of the GDP report coupled with continued strong job growth and decent consumer spending suggest that the expansion remains on track. While the official arbiters of recessions are likely to agree with me — they don’t look at GDP but rather measures like job creation — what really matters to households and businesses is whether their spending power or foot traffic is drying up.
money-wages

Owner: Paying More Dough Keeps Pizza Shop Staffed

Jul 18, 2022 • News & Media

A new Raleigh pizzeria is among the area restaurants paying employees higher wages, and the owner told WTVD-TV that bigger paychecks are helping him hire and retain workers. Institute Chief Economist Gerald Cohen said he thinks bar and restaurant workers have long been underpaid and called putting more money in their pockets beneficial to society. “As long as you don't have the inflationary spiral, this could be a really positive outcome. It just means it might cost people more to go to a restaurant,” Cohen said.
American-grocery-store-inflation

The Drop in Consumer Confidence Indexes Tells a Nuanced Story – Let’s Not Overreact to It

Jul 8, 2022 • Commentary

UNC Kenan-Flagler Business School Professor Camelia Kuhnen is an expert in corporate finance, behavioral finance and neuroeconomics, the application of neuroscience tools and methods to economic research. As many question whether a recession is on the way, she answers some questions about how the most notable consumer confidence surveys differ and whether Americans are prone to economic gloominess.
gas pump

Decrease in Gasoline Prices Could Be a Sign of Recession Fears

Jul 6, 2022 • News & Media

Institute Chief Economist Gerald Cohen spoke to both WRAL-TV and WTVD-TV on July 5, saying the potential downside of a recent decrease in gasoline prices is that it may reflect concerns in the markets that the economy is going into recession. “Economic activity slows, gasoline demand slows,” Cohen said. “If [prices are] coming down because people think we’re in a recession, then that’s bad.”
The Federal Reserve Building In Washington DC, USA

Can the Fed Brake Inflation (Expectations) Without Breaking the Economy?

Jun 16, 2022 • Commentary

The Fed tried to show its inflation-fighting mettle by raising the federal funds rate, the short-term interest rate it directly controls, by 0.75 of a percentage point. This is the largest increase since 1994, though the funds rate remains at a quite low 1.625%, especially relative to the 8.6% inflation reading last week. The Fed seemed to be spooked by the inflation print — which, rather than declining as many forecasters (including myself) expected, rose to its highest level since 1981. More important, in my opinion, longer-term measures of consumer inflation expectations and uncertainty increased.
Inflation, Uncertainty Has Shoppers Doing What They Can to Save Money

Inflation, Uncertainty Has Shoppers Doing What They Can to Save Money

Jun 11, 2022 • News & Media

Higher prices for gas, groceries and nearly everything else are on consumers’ minds after a government report Friday showing that inflation is up 8.6% on a year-over-year basis, the largest jump since late 1981. Chief Economist Gerald Cohen tells WTVD-TV, “When people start saying, ‘I think inflation is going to continue to occur, that means that the Fed has to work harder and that it could end badly.”
Gender Pay Gap

Has Inflation Peaked? The News Is (Mostly) Good

May 11, 2022 • Commentary

First, the good news. Given what we know about current economic conditions, it is likely that the consumer inflation rate has peaked in the U.S. for the current cycle. Recent inflation reports on the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) Implicit Price Deflator, which is the Federal Reserve’s preferred measure, show a jump to new 40-year highs in March but signs of moderation in coming months. For example, consumer goods with very large 12-month cost runups such as used cars and food away from home are starting to see prices moderate. Likewise, prices of important household goods like apparel, furnishings, prescription drugs and recreation commodities (think TVs and Pelotons) are flattening. Furthermore, some important energy prices such as crude oil and gasoline have stabilized in April after jumps in the first quarter. So, while inflation will surely remain elevated for some time, it is unlikely to get much worse.
Container Ship

The Mother of All Supply Chain Shocks

Mar 28, 2022 • Commentary

Concerns about further supply-chain troubles are on the rise. Just a few months ago the “temporary disruptions” stemming from covid were predicted to work themselves out in 2022. However, businesses are now faced with the possibility of disruptions much more severe than those experienced to date. These stem from two sources: interrupted supplies in essential raw materials and agricultural commodities resulting from Russia’s invasion of Ukraine and the potential for a rapid (and massive) spread of COVIC-19 in China resulting in suspensions to manufacturing operations there.
Can the West Sustain Sanctions Against Russia?

Can the West Sustain Sanctions Against Russia?

Mar 4, 2022 • Commentary

Together with many business and economic leaders around the globe, we at the Kenan Institute of Private Enterprise support the harshest feasible sanctions against Vladimir Putin in the immediate interest of Ukraine and its people. More broadly, we view such measures as vital to the long-term survival of democratic values. But as the Russian invasion continues, seemingly unabated by unprecedented economic and financial sanctions, we must ask: what more is feasible? And for how long can such restrictions be sustained?
Finances

Should we worry about a wage-price spiral?

Feb 16, 2022 • Commentary

The jumps in the inflation rate over the last few months have been larger and longer-lasting than expected.  For much of 2022 economic forecasters, including those at the Federal Reserve, assumed that higher inflation rates would be short-lived—or “transitory” using the preferred jargon of the day. Inflation was expected to start shifting back towards the Fed’s 2% target as supply-chain bottlenecks were resolved and a pandemic-induced shift in demand for consumer goods swung back toward consumer services.  Instead, recent inflation prints have set 40-year records and we are seeing more discussion about the possibility of a “wage-price” spiral. 
Inflation

Is Inflation Transitory or Long-Lived?

Jan 24, 2022 • Commentary

Inflation hit its highest level in almost forty-years, with overall prices up 7% in 2021. Is this a transitory increase as a result of COVID-driven demand and supply shortages, with inflation likely to decelerate to around 2% over the next year? Or, is inflation the result of a meaningfully overheated economy and likely to remain meaningfully higher than the Fed’s 2% target precipitating changes in business behavior and an aggressive policy response?