Last week, I spent several days in Philadelphia for the Annual Meeting of the National Association for Business Economics (NABE). The event brings together economists from central banks, think tanks, corporations, and universities to assess the state of the global economy. The theme this year was Global Economy in Transition: Finding Opportunity Amid Disruption. Sessions explored the pressures shaping global business and policy: geopolitical instability, shifting trade regimes, monetary divergence, and the disruptive force of technology. There were also discussions of long-term structural issues such as climate risk, labor markets, and the balance of economic power.

The purpose of this gathering, as my dear friend Kent insists, is not to forecast the price of copper next quarter, but to expose the fundamental choices (and their costs) that reshape our financial lives. While a fun and lively gathering, the atmosphere was serious, analytical, and ultimately, pragmatic.

As Kent and I highlighted two weeks ago, conventional recession indicators suggest a healthy economy, though recent trends in the labor market for college graduates paint a different picture. We pointed to some appalling anecdotes and statistics, including the case of the Computer Science major who submitted 5,762 job applications, only to hear back from none.

This reality begs the question of whether job creation in the age of AI will ever speed up as individuals, companies, governments, and educational institutions adapt. If so, when?

In a podcast interview, LinkedIn’s Chief Economist, Karen Kimbrough, expresses optimism for the future of work in the age of AI. She acknowledges the unusually slow hiring rate for recent grads, but nonetheless offers the reassuring take that current trends are cyclical and that AI-embracing grads will fare the best in the labor market.

If there really is a rainbow after the storm and her forecasts come to fruition, when will we start seeing the evidence of it? What actions must be taken by companies, governments, and job seekers themselves to ensure a future where AI development works in favor of job seekers rather than against them? What does it mean for job seekers to “embrace AI?” What incentives underpin whether or not we, as a society, will work to ensure that AI does not leave today’s college grads behind?

In 2025, if you asked the average economist about the U.S. labor market, the answer might sound reassuring: the unemployment rate is holding steady around 4%, inflation is relatively under control, and job growth continues month after month. But ask a 23-year-old college graduate with a crisp new diploma and a browser full of unanswered job applications, and you’ll hear a different story.

A quiet crisis is unfolding in the United States that eludes headline economic metrics yet is painfully evident in overflowing inboxes, mounting loan statements and waning optimism among young Americans entering the workforce. In mid-2025 the unemployment rate for recent U.S. college graduates reached 5.8%, according to Bureau of Labor Statistics data, its highest level in more than a decade apart from the pandemic spike. More strikingly, this graduate jobless rate now exceeds the national figure, overturning the long-standing pattern in which new degree-holders enjoyed lower unemployment than the wider labor market.

Picture this: you walk into your favorite department store and notice two things at once. First, the racks are heavier with "40% off" tags than you have seen in years. Second, the checkout line feels strangely light, with fewer people and smaller baskets. What’s sad is that this picture may not be all that difficult to imagine…

For professional economists, these signals are not trivial. But for households, they are even more telling. Recessions leave footprints in daily life long before policymakers announce them.

At the time of writing, the probability of an Economic Crisis, defined as the overlap of a firm recession and a household recession, stands at 46.5% over the next three months. The broader likelihood of either type of recession occurring is 82.4%. These probabilities are serious, but they do not have to be paralyzing.

The Honest Economist’s central argument is that recessions are always felt before they are declared. The question is how to notice them and what to do when you do.

For decades, economists have looked beyond GDP charts and payroll data to find meaning in the everyday economy. Some of these informal signals began as jokes, others as casual observations, but many contain a hard truth. When households shift their choices in food, grooming, or even undergarments, those decisions often reflect deeper anxieties about the future.

The federal funds rate is not some simple light switch. You cannot flip it down and flood the economy with prosperity, nor crank it up and instantly stamp out inflation. Yet, time and again, politicians sell it that way.

The latest example comes from the President’s aggressive campaign to slash interest rates by as much as three percentage points, to around 1%. The adminstration insists this will supercharge growth, lower mortgage costs, and save the government trillions in debt payments. But there’s a catch: no serious Fed official supports it.

The effort has become entangled with an even more troubling move. The White House is attempting to remove Federal Reserve Governor Dr. Cook, an accomplished economist whose scholarship spans international and innovation economics. Removing a sitting governor, would be unprecedented. It would also mark a dangerous intrusion of political bias into an institution deliberately insulated from politics.

To understand why this matters, we need to step back. What is inflation? What drives economic growth? And how does the federal funds rate, the obscure-sounding overnight lending rate between banks, actually connect the two?

The answers resist sound bites. That is precisely why treating the Fed’s rate as an on/off switch is both wrong and dangerous.

Ten days running is my tally of hearing some variation of the same uneasy question: “Will we be able to trust the numbers coming out of Washington?”

And these aren't conspiracy theorists or online agitators. They are fellow economists, investors, and business leaders. You know… sensible, data-driven people… who built careers on the assumption that official statistics were, if not perfect, at least honest.

Now that trust is starting to fray.

When government-reported metrics like inflation, GDP, or unemployment begin to sound too clean, too convenient, or too contradictory, the impact goes beyond economic modeling. The unease spills into boardrooms and newsrooms. Financial forecasts lose their foundation. People begin to wonder not just what the economy is doing, but whether they can believe anything they’re being told.

I’ve felt that uncertainty myself. And I’ve heard it in the voices of colleagues, clients, and friends. There is concern, frustration, and a fear that something foundational is slipping away.

But here’s what I say in return: Don’t despair.

Among colleagues who follow the U.S. economy closely, shifts in policy direction don’t usually come as a surprise. Yet, in recent weeks, a series of reports has indicated that the administration aims to select the next Federal Reserve Chair chiefly for ideological loyalty, favoring a candidate inclined to reduce interest rates regardless of macro dynamics; the prospect has given both these authors a pause.

As trained monetary and financial economists, we’ve spent years studying the delicate architecture that allows the Federal Reserve to function independently from political pressures. When that independence is threatened, so too is the foundation of macroeconomic stability.

This moment, in our view, requires more than private concern. It calls for public reflection.

In early 2024, a friend of mine (let’s call her Jane) launched a skincare startup with a mission that was equal parts personal and global. Her serums blended botanical oils from Southeast Asia with rare extracts from Latin America, promising customers something fresh, clean, and effective.

By mid-year, boutique retailers had taken notice. Online orders were ticking upward. She was finally seeing the promise of her idea come to life until a spreadsheet of customs estimates landed in her inbox. A critical ingredient, once affordable, now carried a tariff surcharge in excess of 100%. Essentially, Jane’s next shipment would cost more in tariffs than the goods themselves.

At first, I laughed.

The idea that a grocery store cake could spark a viral meltdown felt like classic internet absurdity. When I read that Whole Foods had quietly altered the recipe of its beloved Berry Chantilly cake, I chuckled at the idea of social media users crying betrayal over a dessert.

Almost immediately, though, I felt something else: inspired. The public outcry worked. Faced with customer backlash, Whole Foods reversed course and reintroduced the original recipe. A multibillion-dollar enterprise had changed direction, not because of lawsuits or legislation, but because regular people noticed a change they weren’t okay with and refused to let it slide. That’s no small thing.

But then, I got annoyed.

For this wasn’t just about cake. It wasn’t even just about Whole Foods. Rather, it offers a glimpse into how even the most well-resourced firms quietly probe the limits of what they can impose on consumers. Instead of increasing prices outright, they shrink portions, substitute ingredients and skimp on quality. In this case, the shelf price stayed fixed despite higher berry costs and stronger demand; the company simply degraded the recipe and counted on customers failing to notice.

They never expected to feel stuck in their dream home.

When two dear friends of mine (let’s call them Joe and Jane) bought their two-bedroom starter house in late 2020, it felt like the beginning of a promising chapter. Interest rates hovered just below 4 percent, their mortgage felt manageable, and with a baby on the way, they believed they were laying down roots. By the start of 2025, the picture had changed. Two children, hybrid jobs pulling them in opposite directions, and no third bedroom in sight. They’d outgrown the house. What they hadn’t outgrown was their 3.5 percent mortgage.

Each time they browsed listings in nearby school districts, they encountered the same arithmetic. Even a comparable home, with today’s mortgage rates approaching 7%, would push their monthly payments noticeably higher. Technically, they could afford the increase, yet they always decided against putting their house on the market. To them, the cost of moving was a direct cost to their sense of security.