NEW YORK, Feb 15 (Yonhap) – The U.S. economy appears to be edging closer to a “soft landing” after the post‑pandemic inflation surge, but it is too early to declare victory over price pressures, the Wall Street Journal reported Friday.
Citing recent data, the paper said the backdrop for the economy has turned more favorable, with inflation easing, the labor market still solid and overall growth holding up.
The consumer price index (CPI) released on Feb. 13 showed core CPI, which excludes volatile food and energy, rose 2.5% year-on-year in January, the smallest increase in four years and 10 months, since March 2021.
Two days earlier, Labor Department figures showed the unemployment rate fell to 4.3% in January, while nonfarm payrolls increased by 130,000 from the previous month, well above market expectations.
“People used to tell me that the only way to bring inflation down to 2% was a sharp rise in unemployment,” Jeffrey Cleveland, chief economist at investment firm Payden & Rygel, was quoted as saying. “But the worst disaster that everyone had in mind didn’t happen.”
The WSJ likened the situation to an economy that no longer needs an “oxygen mask” but still should not “unbuckle the seatbelt.”
The personal consumption expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – was last reported through November, when it was up 2.8% from a year earlier, still stuck in the mid‑to‑high 2% range.
The Fed targets 2% inflation as measured by the PCE index when assessing whether it has met its price‑stability mandate. Some on Wall Street expect U.S. companies to start passing on higher costs tied to the Trump administration’s tariff policies to consumers, adding to price pressures.
Fed officials themselves are not ruling out the risk of an inflation rebound. Philadelphia Fed President Anna Paulson said last month, “I won’t declare victory on a soft landing. Inflation has to slow to 2%, and we haven’t finished the job.” Policymakers currently project PCE inflation will only slow to about 2.4% by the end of this year, according to the WSJ.
The paper also highlighted lingering doubts about the true strength of the labor market. An annual benchmark revision to employment data showed average monthly job growth in 2025 was just 15,000, and gains were heavily concentrated in healthcare-related sectors such as nursing, suggesting underlying fragility.
Economists expect the jobs landscape to evolve into a “no hire, no fire” environment, where unemployment remains stable but hiring slows markedly. “It wouldn’t take much to upset this fragile balance,” the WSJ said.
Another vulnerability lies in household wealth, which has been buoyed by years of stock market gains. A sharp equity sell-off could erode household balance sheets, dampen consumption and sap one of the main engines of U.S. growth.
At the same time, some analysts warn that consumer strength itself could jeopardize a soft landing. “I’m a little worried about a soft landing because household finances are generally in good shape,” Mark Zandi, chief U.S. economist at Barclays, told the paper. Robust spending supports growth but can make it harder to bring inflation fully back to target.
If the Trump administration rolls out expansionary fiscal measures ahead of the November midterm elections, that could further stimulate demand and complicate the inflation outlook, the report said. There is also concern the Fed could come under pressure from President Donald Trump to cut interest rates more aggressively, even if growth remains strong.
The WSJ noted that the policy path ahead may hinge on who leads the central bank. “Whether Kevin Warsh, President Trump’s choice to succeed Jerome Powell as Fed chairman, will inherit the Fed’s mandate to consolidate recent gains (in slowing inflation) or pursue something more ambitious will determine what comes next,” the paper said.
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