Coeur d'Alene economist: Don't overreact

When the stock market fell more than 1,000 points Monday, many people panicked.

They had good reason.  

A weak manufacturing report and an increase in the unemployment rate indicated the U.S. economy was slowing, and Japan’s Nikkei dropped 12.4%, the worst day in nearly 50 years.   

Stifled worries of that long talked about recession suddenly roared to life.

“People are going, ‘Oh my God, the recession is here,'" said John Mitchell. 

"Those kinds of headlines spook people, and if it gets people to cut back on spending, that would be a risk,” he added.

The former chief economist for US Bank has monitored the ups and downs of the financial world for more than five decades. He doesn’t see an economic crash in the cards. He has learned, among many things, to remain calm.

“I think we have to be careful of overreacting,” Mitchell said Wednesday in an interview with The Press. "It's not in the data. Where’s the decline in employment? It’s not there.” 

The market calmed fears when it bounced back Tuesday, but then it retreated again Wednesday. For the most part, Mitchell likes what he sees. He said employment continues to rise, inflation is closer to the 2% goal targeted by The Federal Reserve, mortgage rates have dropped below 7% and he is certain The Fed will cut interest rates in September by about a quarter percent. 

“But the risks have changed,” the Coeur d'Alene man said. 

That's because since March 2022, the Federal Reserve has been focused on bringing down inflation. 

“It’s come down. It’s still above their target but now you've got concern on the employment side. Now they have to think a lot about what’s going on in the labor market," he said.

“The labor market has clearly softened, and I think The Fed is going to react to that,” Mitchell added.

While the U.S. unemployment rate rose to 4.3% in July, up from 3.5% in July 2023, Mitchell pointed out the labor force added 114,000 jobs. 

He said the stock market had an incredible run in recent months, so a fallback shouldn’t be entirely unexpected, and he noted the S&P 500 is up 10% for the year despite a recent correction. 

He said the last national recession in 2020 lasted just two months, from February to April. 

“Most of the time we’re growing. Recessions are far and few between,” he said. 

And he expects growth to continue.

"The expectations are still up. But there’s a lot of uncertainly in terms of policy," Mitchell said.

He said Republicans and Democrats have taken a “protectionist bent” with tariffs when it comes to international trading.

“That’s a long-run downer for the economy,” he said.

Mitchell said the national debt, which recently topped $35 trillion for the first time, must eventually be addressed. 

“There’s deafening silence. Nobody is talking about that,” he said. 

While some are saying the Federal Reserve is waiting too long to cut interest rates, Mitchell said that remains to be seen.

“We’ll find out in six months,” he said. 

When it comes to Idaho's economy, Mitchell said it's doing well.

He said Idaho recently ranked fourth in the nation in job growth, according to the U.S. Bureau of Labor Statistics. He said all 50 states saw year-over-year employment growth, another positive economic indicator.

June data saw a 2.9% year-over-year job growth in Idaho and an unemployment rate of 3.4%. In Coeur d’Alene, year-over-year job growth was 1.2%.

Idaho building permits rose 13.4% for the first five months of 2024, but fell 11.7% in Kootenai County due to a drop in multi-family permits 

"Idaho continues to fare well in terms of income and employment growth, but the big national issues such as tax policy, the debt burden, trade policy and immigration will await election results,” Mitchell wrote.

He finds people's perceptions when it comes to the economy a bit puzzling.

If you ask most people how they’re doing economically, they’ll say OK, Mitchell said, but if you ask what they think of the national economy, many will say it’s in the tank. 

“It's an interesting disconnect,” he said.