The US economy is currently facing a rare and challenging situation in which big companies are thriving while consumers are struggling. According to Nancy Lazar, Piper Sandler’s chief global economist, this “bifurcated” economy has only been seen twice before, both times ending in a recession. Large businesses have benefited from high interest rates, favorable financial conditions, surging stock prices, and government support, while consumers are burdened with mounting debts and rising inflation that erodes their wage gains.
Lazar points out that the structure of interest rates needed to increase to address inflationary pressures, eventually leading to a recession to correct the excesses in the economy. She believes that a recession, despite the challenges it poses, is necessary to combat inflation effectively.
With a 53% chance of a recession on the horizon, Lazar emphasizes the importance of addressing the inflation problem before it becomes deeply ingrained in the economy. She is more concerned about the persistence of inflation than the potential consequences of a recession, highlighting the delicate balance between economic stability and price pressures.