Finance

Why it may not be fair to say Fed made inflation 'mistake'

Published

1 year ago

September 8, 2024

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Why it may not be fair to say Fed made inflation 'mistake'

A version of this post first appeared on TKer.co

In the context of inflation, was the Federal Reserve late to ? Most would agree the answer is yes.

But the Fed doesn’t have just one mandate of promoting price stability. It has a of promoting both price stability and maximum employment.

Taking employment into consideration, that the Fed was late to tighten monetary policy.

I can’t pinpoint exactly when the calls to tighten began when inflation was heating up three years ago. But we can all agree that these calls grew loudest ahead of the .

The core PCE price index — the Fed’s preferred measure of inflation — was at a high of 5.5% in March 2022. Clearly, inflation was a problem.

That same month, the unemployment rate was 3.6%, the lowest level since before the pandemic.

The unemployment rate effectively bottomed that month, mostly trending sideways as inflation rates cooled.

What if the Fed acted earlier?

I generally don’t like considering counterfactual scenarios because the world is complex, and no one can say with certainty what would’ve actually happened in the past if certain things had gone differently. But since we continue to hear folks casually say that we would’ve been better off if the Fed acted earlier, I’ll indulge in the thought exercise.

What if the Fed hiked rates at its January 2022 meeting? Maybe our inflation mess would’ve ended a little sooner. But the unemployment rate was higher at 4%. Would we have been okay with the unemployment rate trending at 4%? Maybe.

What if we went back a little further, and the Fed hiked rates at its October/November 2021 meeting? The core PCE price index was increasing at about a 4.5% rate. Price-sensitive consumers would’ve been much happier to see inflation top out there. But the unemployment rate was higher at about 4.5%. Does the cost of keeping unemployment almost a full percentage point higher justify the benefit of keeping prices a bit cooler?

What if the Fed moved even sooner when the unemployment rate was even higher?

The big picture

Here’s my point: While it’s fair to argue the Fed hiked rates too late in the context of inflation, I don’t think it’s fair to argue they made a mistake — especially when you consider the goals of monetary policy in their entirety, which include promoting maximum employment.

While high inflation is a headache for consumers, at least some of it was the result of newly employed people finally being able to afford to purchase goods and services.

Like I said before, the world is complex. So who knows? Maybe there’s a scenario where the Fed tightened monetary policy sooner and the unemployment rate continued to fall anyway as inflation cooled.

But the likely outcome of tighter monetary policy earlier in this economic cycle would have been unemployment bottoming at a higher level than what we’ve experienced.

FILE PHOTO: Federal Reserve Board Chairman Jerome Powell leaves after a news conference at the Federal Reserve Building in Washington, U.S., December 14, 2022. REUTERS/Evelyn Hockstein/File Photo (Reuters / Reuters)

I’m not suggesting the Fed was right or wrong to adjust monetary policy when it did. I’m just saying that you cannot talk about how monetary policy actions affect inflation without addressing how they affect employment.

How about instead of proclaiming that the Fed was late in the context of inflation — which is not a controversial view — we instead tackle the of how we balance the tradeoff between price stability and employment. How many people is it okay to leave unemployed if it means improving price stability?

The state of play

Over the past two and a half years, . And while the unemployment rate remains low by historical standards, it has been .

Last month when the unemployment rate was 4.3%, : “We do not seek or welcome further cooling in labor market conditions.“

“The time has come for policy to adjust,” he . It was one of the more explicit signals that rate cuts would begin soon, a development most market participants welcome.

Of course, there are also voices brushing off the rise in unemployment as they argue that the Fed should wait longer until inflation is defeated more definitively.

Reviewing the macro crosscurrents

There were a few notable data points and macroeconomic developments from last week to consider:

The labor market continues to add jobs. According to the report released Friday, U.S. employers added 142,000 jobs in August. It was the 44th straight month of gains, reaffirming an economy with growing demand for labor.

Total payroll employment is at a record 158.8 million jobs, up 6.4 million from the prepandemic high.

The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — declined to 4.2% during the month. While it continues to hover near 50-year lows, the metric is near its highest level since October 2021.

While the major metrics continue to reflect job growth and low unemployment, the labor market isn’t as hot as it used to be.

Wage growth ticks up. Average hourly earnings rose by 0.4% month-over-month in August, up from the 0.2% pace in July. On a year-over-year basis, this metric is up 3.8%, near the lowest rate since June 2021.

Job openings fall. According to the , employers had 7.76 million job openings in July, down from 7.91 million in June. While this remains slightly above prepandemic levels, it’s from the March 2022 high of 12.18 million.

During the period, there were 7.16 million unemployed people — meaning there were 1.07 job openings per unemployed person. Once a sign of , this telling metric is now below prepandemic levels.

Layoffs remain depressed. Employers laid off 1.76 million people in July. While challenging for all those affected, this figure represents just 1.1% of total employment. This metric continues to trend near pre-pandemic low levels.

Hiring activity continues to be much higher than layoff activity. During the month, employers hired 5.52 million people, up from 5.25 million in June.

People are quitting less. In July, 3.28 million workers quit their jobs. This represents 2.1% of the workforce. While up from the prior month, it remains below the prepandemic trend.

A low quits rate could mean a number of things: more people are satisfied with their job; workers have fewer outside job opportunities; wage growth is cooling; productivity will improve as fewer people are entering new unfamiliar roles.

Labor productivity inches up. From the : “Nonfarm business sector labor productivity increased 2.5% in the second quarter of 2024… as output increased 3.5 percent and hours worked increased 1.0%. … From the same quarter a year ago, nonfarm business sector labor productivity increased 2.7%.”

Unemployment claims ticked lower. declined to 227,000 during the week ending August 31, down from 232,000 the week prior. While this metric continues to be at levels historically associated with economic growth, recent prints have been trending higher.

Card spending data is stable. From Bank of America: “Total card spending per household was up 2.8% y/y in week ending Aug 31, according to BAC aggregated credit & debit card data. This increase was likely driven by the change in the timing of Labor Day compared to last year (09/02/24 versus 09/04/24). Within sectors, furniture saw the biggest increase since last week, while entertainment showed the largest decline.”

Gas prices fall. From : “After idling over the Labor Day weekend, the national average for a gallon of gas resumed its pace of daily declines by falling six cents since last week to $3.30. Key contributors are low gas demand and the plunging cost of oil, which is struggling to stay above $70 a barrel.”

Mortgage rates hold steady. According to , the average 30-year fixed-rate mortgage stood at 6.35% this week. From Freddie Mac: “Even though rates have come down over the summer, home sales have been lackluster. On the refinance side however, homeowners who bought in recent years are taking advantage of declining mortgage rates in order to lower their monthly payments.”

There are in the U.S., of which 86 million are and of which are . Of those carrying mortgage debt, almost all have , and most of those mortgages before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.

Construction spending ticks lower. declined 0.3% to an annual rate of $2.16 trillion in July.

Services surveys look up. From S&P Global’s : “An improvement in the headline services PMI to its highest for nearly two-and-a-half years provides further encouraging evidence that the US economy is enjoying robust economic growth in the third quarter, adding to signs of a ‘soft landing’. The faster service sector expansion means the PMI surveys are signalling GDP growth of 2-2.5% in the third quarter. At the same time, the August survey data signaled a further cooling of selling price inflation, notably in the service sector, which has now eased close to the average seen prior to the pandemic and a level consistent with the Fed’s 2% inflation target.”

Manufacturing surveys don’t look great. From S&P Global’s : “A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward-looking indicators suggest this drag could intensify in the coming months. Slower than expected sales are causing warehouses to fill with unsold stock, and a dearth of new orders has prompted factories to cut production for the first time since January. Producers are also reducing payroll numbers for the first time this year and buying fewer inputs amid concerns about excess capacity.”

Similarly, the ISM’s signaled contraction in the industry.

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than hard data.

Factory orders jump. According to the , new orders for manufactured goods rose 5% to $592.1 billion in July.

Key recession indicators point to growth. Here’s a from economist Justin Wolfers tracking the trajectory of key measures of economic activity.

Near-term GDP growth estimates remain positive. The sees real GDP growth climbing at a 2.1% rate in Q3.

Putting it all together

We continue to get evidence that we are experiencing a where inflation cools to manageable levels .

This comes as the Federal Reserve continues to employ very tight monetary policy in its . Though, with inflation rates having from their 2022 highs, the Fed has taken a less hawkish tone in , even signaling that .

It would take monetary policy as being loose, which means we should be prepared for relatively tight financial conditions (e.g., higher interest rates, tighter lending standards, and lower stock valuations) to linger. All this means for the time being, and the risk the into a recession will be relatively elevated.

At the same time, we also know that stocks are discounting mechanisms — meaning that .

Also, it’s important to remember that while recession risks may be elevated, . Unemployed people are , and those with jobs are getting raises.

Similarly, as many corporations . Even as the threat of higher debt servicing costs looms, give corporations room to absorb higher costs.

At this point, any given that the .

And as always, should remember that and are just when you enter the stock market with the aim of generating long-term returns. While , the long-run outlook for stocks .

A version of this post first appeared on TKer.co

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Finance

Canton High School students find success in personal finance

Published

10 hours ago

March 2, 2026

Press Room

Canton High School students find success in personal finance

CANTON, Miss. (WLBT) – A group of juniors at Canton High School has won back-to-back state championships in Mississippi’s Personal Finance Challenge.

The team’s work can be seen through the school’s reality fair, where students are assigned careers and salaries and must make the same financial decisions adults face each month.

Teena Ruth, a personal finance teacher, said the exercise resonates beyond the classroom.

“It’s an eye-opening experience,” Ruth said. “They kind of see what it’s like for even their parents when they have to make these decisions every day — when they are writing out those checks.”

For student Jalynn Dunigan, the program carries personal significance.

“To be known for something else outside of cheer and not just what I do on a court, on a field. I can do something and put my brains to it and people can know that I’m not just pretty,” Dunigan said. “I’m smart as well.”

Student Henser Vicente said the team’s success sends a broader message.

“We’re making a statement that we’re not what you think we are,” Vicente said. “Like, we’re greater than what you think. We can do better than what you think we can do.”

A proposed financial literacy bill in Mississippi would require students to pass a semester of personal finance as a graduation requirement.

Alexandria Luckett said the team’s national success is already motivating others at the school.

“I’m so happy that people are getting more involved in things like this and stepping out of their comfort zone and just putting themselves out there,” Luckett said. “Because I know there’s a lot of shy students [who] don’t necessarily join clubs or anything. So, when they see a group like this going to nationals two times in a row, I feel like that motivates a lot of students.”

Nelly Rosales said competing at the national level has given the team a platform beyond the competition floor.

“We’ve gone to Cleveland, Ohio, we’ve gone to Atlanta, and then hopefully this year we get to go out of state again,” Rosales said. “Being able to be a role model to a lot of children — like especially Hispanic girls who don’t see a lot of role [models] especially in the community — being able to be a role model is a really big thing.”

The students are currently gearing up for this year’s State Personal Finance Challenge set to take place next month.

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Finance

A 27-year-old drew down half of her stock portfolio to buy real estate. It’s part of her plan to hit financial independence.

Published

22 hours ago

March 1, 2026

Press Room

A 27-year-old drew down half of her stock portfolio to buy real estate. It’s part of her plan to hit financial independence.

A few years into her accounting career, Carolyn Yu began thinking seriously about financial independence.

“I’d feel very stressed and tired,” Yu, who was working at a Big Four firm at the time, told Business Insider. “I thought, maybe someday I could have more freedom and not spend 24/7 working at a very demanding job.”

She picked up “Rich Dad, Poor Dad” and started listening to the popular real estate podcast, BiggerPockets. One takeaway stood out: focus on buying assets that can grow in value.

Yu, who’d been consistently investing in the stock market since college, felt compelled to make a move. In late 2024, she drained about half her stock portfolio in order to pay cash for a two-bedroom, two-bathroom condo in Fort Worth, Texas.

The Bay Area-based Gen Zer had been eyeing Texas in part for its tax advantages, including the absence of state income tax. She considered other Texas markets, but Fort Worth stood out for its affordability and growth potential.

“The population growth, the crime rate, the property value growth — they all looked good to me,” she said.

She flew to Fort Worth, toured the condo, signed a contract the next day, and closed within a month. Yu intentionally kept her first purchase under $100,000, unsure whether she had the capital or experience to take on something larger.

“Pretty much 50% of my stock portfolio was gone,” she said. But the drawdown didn’t faze her. “I knew that $80,000 transitioned into another investment.”

Scaling to 5 properties in 2 years by recycling capital

Yu grew her portfolio by reinvesting equity from one property into the next.

Her strategy centers on buying below market value, improving the property, allowing it to appreciate, and then tapping into the built-up equity to help finance another purchase.

As her portfolio expanded, her financing evolved. She moved from paying all cash for her first condo to using conventional loans and later DSCR (debt service coverage ratio) loans, which are designed for investors and rely heavily on a property’s cash flow.

Her second purchase was a two-bedroom, one-bath single-family home. She bought it in June 2025 for about $105,000, putting down 25%. After investing about $50,000 in renovations, she said the home appraised at $195,000 and rented for $1,500 a month.

“This property allowed me to execute the BRRRR strategy successfully,” she said, referring to buy, rehab, rent, refinance, repeat. She said she was able to pull out about 70% of the appraised value to help fund her next purchases.

Within about two years of buying her first condo, Yu had a five-property portfolio. Her first three are cash-flowing, while her fourth is currently listed for rent, and her fifth is being prepared for tenants. Business Insider reviewed mortgage documents to confirm ownership and lease agreements to verify rental rates.

Yu resides in the Bay Area, but invests in real estate in Fort Worth.

Courtesy of Carolyn Yu

One of the challenges she’s faced since buying property has been vacancy.

She purchased her first condo in late 2024 — “probably the worst time to rent because of winter vacancy,” she said — and it sat empty for six months. She eventually lowered the asking rent by about $100 a month before securing a tenant.

The vacancy was stressful, but manageable because she had paid cash and didn’t carry a mortgage. Still, she owed about $600 a month in HOA dues.

Her advice to other investors: keep at least six months of reserves, know your numbers inside and out, and expect vacancies and repairs.

Why she prefers real estate to stocks

Yu still invests in stocks, but said she prefers real estate because it feels more controllable and scalable. In addition to generating a few thousand dollars a month in rental income, she’s also building equity in her properties.

“Real estate gave me more control, more tangible assets, more tax efficiency,” she said, pointing to depreciation, mortgage interest deductions, and the ability to refinance without selling. She also enjoys negotiating deals.

She funnels most of her rental income back into her stock portfolio. Her end goal is financial independence and work flexibility.

Yu wants to own at least eight properties by 2027 and have her portfolio appraised at roughly $2 million. By then, she hopes rental income will cover her expenses and provide enough cushion to leave her W-2 job, so she can focus solely on her real estate business.

She’s also changed how she thinks about spending. Early in her career, she said she coped with work stress by traveling frequently. Now, she prioritizes investing over lifestyle upgrades.

“I would rather put my money into investments right now in exchange for vacations in the future,” she said. “I think it’s totally worth it because I think in two years, I could be financially free.”

Finance

When making travel plans, timing and financing are major considerations

Published

1 day ago

March 1, 2026

Press Room

When making travel plans, timing and financing are major considerations

For the true travel fan, there’s often a built-in conflict on how best to plan for your next adventure.

On the one hand, the world awaits. Spin the globe, cover your eyes and point. Or, throw a dart at the map! Then it’s time to dig in and research your next dream destination.

On the other hand, getting the best bargain can be a last-minute proposition. There may be a fare sale today, but not tomorrow. How does that mash up with your bicycle tour in Italy? Or your friend’s wedding in Hawaii?

Spreading out all the options on the table can be daunting. It’s a bit like taking a sip from the fire hose. And we all have varying degrees of tolerance for changing prices, tiny seats and geopolitical uncertainty.

So let’s take a snapshot of what’s happening now, knowing you won’t likely drink from the same river, or fire hose, twice.

Since most of today’s snapshots are on the phone, there are some handy settings: You can zoom in for a closer look at that fruit and cheese platter, frame it up nicely for a good shot of your seatmate, or look out the window and get a nice view from 30,000 feet.

Fares we love. There are just a few fares to zoom in on right now.

Anchorage-Chicago. Three airlines will offer nonstop flights this summer: Alaska, United and American. Alaska and United fly the route year-round. There are just a couple of months where travelers have to stop in Denver or Seattle on the way. Right now, the Basic price is $349 round-trip. United has the least-expensive Main price of $429 round-trip. Alaska charges more: $449-$469 round-trip.

The rate to Chicago is steady throughout the summer, as long as you’re open to flying on other airlines, including Delta and now Southwest, starting May 15.

Anchorage-Dallas. Choose from four airlines with competitive prices. United and Delta offer great rates starting on March 30, for travel all summer and into the fall for $331 round-trip in basic economy. Remember: Basic economy means you’ll be sitting in the middle seat back by the potty. There are few, if any, advance seat assignments permitted and you’re the last to board. Don’t expect to accrue many frequent flyer points. Alaska will give you 30%. Delta and American offer none. United is axing MileagePlus points for basic travelers soon.

Delta and United offer the chance to pay $100 more for pre-reserved seats and mileage credit. Of course, they may charge you more for a nicer seat on the plane. But that’s another story.

American Airlines charges a little bit more, about $20 more for a round-trip, to fly nonstop. It’s a nice flight.

Anchorage-Albuquerque. Delta is targeting this route with a nice rate: $281 round-trip in Basic or $381 in Main. But it’s just between May 23 and June 29. Why? Well, it lines up nicely with Southwest’s launch on May 15. Who knows why airlines cut their fares during a traditionally busy season? It’s just a hunch.

Looking at airfares more broadly, there are a few more bargain rates out there, but most only go through May 20. Airlines are hoping for a robust summer — so prices go up after that.

For example, between March 29 and May 20, Alaska Air offers a nonstop from Anchorage to Los Angeles for $257 round-trip in basic. For pre-assigned seats and full mileage credit, the main price is $337 round-trip. Prices go up to $437 round-trip in the summer.

The view from 30,000 feet is pretty clear, although past performance is no guarantee of future results. Several carriers, including American, Delta, United, Southwest and Alaska are adding flights for the summer. There will be robust competition, which means lower fares. Just last week, Alaska Air dropped the price from Anchorage to Seattle to $210 round-trip. That rate is gone, but others will come along.

Charge it. Banks own the airlines by virtue of their popular credit cards. Do they own you, too?

Sifting through the various credit card offers and bonus points emails, it’s easy to forget that banks, not travelers, are the airlines’ biggest customers. At a Bank of America conference last year, Alaska Airlines reported it receives about 15% of its total revenue from its loyalty plan. That adds up to more than 1.7 billion in 2024. Delta has a similar deal with American Express, which paid the airline about $8.2 billion last year.

Think about that the next time the flight attendants are handing out credit card applications in the aisle.

Zooming in, if you’re going to play the Atmos loyalty game on Alaska Airlines, you have to have an Alaska Airlines credit card from Bank of America.

I carry the plain-old Alaska Air card. I used to have two of them, primarily for the $99 companion fare. That’s still a compelling offer. But to get that benefit, you have to charge it on an Alaska Airlines Visa card.

So the question is: Is it worth it to pay $395 per year for the new Summit Visa card from Bank of America?

If you use your credit card for your business or if you regularly charge thousands of dollars every month, the Summit card may be the card for you.

One of the foundational benefits is for every $2 you charge, you earn one status point toward your next elite tier, such as titanium. It’s possible to charge your way to the top tier of the frequent flyer ladder without ever stepping on a plane. If that’s your level of charge-card use, then the Summit is for you. For the lesser Ascent card like mine, you earn one status point for every $3 spent.

For a little wider view, consider that your other travel costs, including accommodations, can hit your budget a lot harder than an airline ticket. It’s one reason I carry a flexible spend credit card in addition to my Alaska Airlines card. Here’s a snapshot of some popular options:

1. Bilt Rewards. I finally signed up for a Bilt account, although I haven’t yet received my card. There are two big benefits with Bilt: You can charge your rent and transfer points to Alaska Airlines. There also is a scheme to charge your mortgage, but it’s more convoluted. But the charge-your-rent option is a stand-alone gold star for the Bilt program, even if you don’t fly Alaska Airlines.

In addition to the link with Alaska Airlines, Bilt points transfer to other oneworld carriers like British, Japan Airlines and Qatar Air. Hotel partners include Hyatt, my favorite, and Hilton. A big bonus comes with the “Obsidian” card, $95 per year: three points for every dollar spent on groceries.

But there’s also a Bilt card with no annual fee. And there are no extra fees incurred when you charge your rent.

2. American Express. If you fly on Delta, the American Express card is a natural choice.

The two companies really are joined at the hip. The last American Express card I had was a Delta “Gold” card, which included a 70,000-point signup bonus. Cardholders get a free checked bag, although Delta offers two free checked bags for SkyMiles members who live in Alaska, and 15% off award tickets.

The Delta card is free for the first year, then $150 per year thereafter.

There is a dizzying array of American Express cards available, including some with no annual fee. But with Delta there is a narrowed-down selection, including one that’s more than $800 per year. That includes lounge access and some other benefits, including a companion pass.

American Express cardholders also can transfer their points to Hilton and Bonvoy as well as to 15 other airlines.

Capital One offers the Venture X card, which offers cardholders 75,000 points plus a $300 travel credit at their in-house travel service. The cost is $395 per year. Get the slimmed-down Venture card for just $95 per year. You still can earn the 75,000 bonus points after spending $4,000 in the first three months. Plus, there’s a $250 credit with Capital One Travel.

Airline partners include EMirates, Singapore Air, Japan Air and EVA Air, from Taiwan. Hotel partners include Hilton and Marriott.

I’ve carried several Chase cards for years. Right now I have the Chase Sapphire Preferred card, for which I received 80,000 bonus points. But that was several years ago. More recently, I got the Chase-affiliated Ink Business Cash card to harvest a 90,000 point bonus. Previously, I carried the Chase Sapphire Reserve. I got a 100,000 point bonus for that. But I dropped that card when the fee went up to $795 per year.

Stacking the cards like that — getting more than one — has helped me to get more bonus points, both for American Express and for Chase.

The best value for Chase points that I’ve found is for Hyatt Hotels. Right now, it’s the best redemption ration, but that can change. Chase also allows for transfers to Emirates, United, Singapore Air and Southwest, among others. The Chase travel portal is managed by Expedia, so you can redeem points for other hotels at a lower redemption rate.

The long view: All airline mileage plans are now credit card loyalty plans. Terms and conditions change, along with signup bonuses and other features of the cards. Last year, Chase dropped its airport restaurant feature, which offered $29 per person at select restaurants in Los Angeles, Seattle and Portland. A couple of years ago, the Priority Pass affiliated with Chase dropped the Alaska Airlines lounges as a partner.

It takes some time and effort to keep up with the programs and get the best value. But airline credit card plans are here to stay, even if the frequent-flyer programs are watered down year after year.