Brisk Mass. economy shows why Fed goes slow

?? Welcome to Trendlines. The secret password is "Basher is back."

I am Boston Globe financial columnist Larry Edelman, and today I meditate on an economic koan: Can a soft landing be too soft?

Plus: The return of "Bad Sisters."

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?? Powell's speed limit

Can a soft landing be too soft?

When the Federal Reserve drove up interest rates to bring down inflation, many economists doubted its ability to achieve a “soft landing” — controlling inflation without triggering a recession. Yet inflation eased, and the economy remained strong. The job market cooled slightly, but unemployment stayed below historical norms.

Now, Fed chair Jerome Powell is cautioning that the economy’s strength means interest rates may not fall as quickly as investors had hoped.

??? The news

A new report on the Massachusetts economy underscores the strength of the national expansion.

• The state’s GDP grew at a 2.9 percent annualized rate from July to September, an improvement from the previous quarter’s 1.9 percent, according to MassBenchmarks, a collaboration between the UMass Donahue Institute and the Boston Fed. In comparison, US GDP rose by 2.8 percent.?

• Massachusetts employers modestly boosted payrolls, while inflation in the Boston area slowed to 3.4 percent over the year ended in September, down from 4 percent in the June period.

Alan Clayton-Matthews, an economist for MassBenchmarks, noted that both the Massachusetts and national economies continue to grow robustly, even as employment growth slows and inflation declines. This aligns with the Fed’s goal of a soft landing.?

?? Why it matters

Powell signaled that the Fed will proceed cautiously after its recent rate cuts, emphasizing that the current economic strength allows for a careful approach.

Powell’s remarks caused a brief pullback in the stock market, which had rallied after Donald Trump’s election. The S&P 500 lost half of its post-election gains over the following days, though stocks modestly recovered on Monday.

?? Between the lines

Fed officials are being deliberate with rate cuts due to lingering uncertainties.

• Inflation is still above the 2 percent target, and central bankers have been repeatedly surprised by the unpredictable post-pandemic economy.

• Additionally, the potential impact of President-elect Trump’s proposed tax cuts, tariffs, and immigration policies remains unclear.

Powell stressed that flexibility is needed to adjust rates if Trump’s policies turn out to be inflationary, as many economists predict.

?? What’s ahead

The labor market will play a critical role in shaping the Fed’s next steps.

Massachusetts’ unemployment rate edged up to 3.9 percent in October, the state said on Friday, while the national rate also ticked higher amid a hiring slowdown.

Powell indicated that if the labor market weakens further, the Fed could intensify rate cuts.

?? Final thought

The economy’s resilience so far shows that the collateral damage from the Fed’s inflation measures was limited. But with the new administration, uncertainty remains — so stay buckled in for now.

?? Trending

Airlines: Spirit Airlines said it would operate as usual after filing for bankruptcy protection on Monday as it attempts to recover from its failed merger with JetBlue.

Health care: Nearly 300 primary care physicians employed by Mass General Brigham notified federal authorities that they want to join a union, citing “burnout” and the “corporatization of medicine” at the state’s largest health system.

Sports business: The Revolution averaged 29,000 fans a game last season. So why does it want a smaller stadium?

?? The Closer?

"Bad Sisters," the delightfully dark who-done-it dramedy, is back with a second season on Apple TV+.

If you enjoyed the first season (I sure did), Globe reviewer Caroline Siede offers a warning:

The trouble is, while season 1 masterfully walked right up to the line of too much darkness without ever quite crossing it, season 2 loses sight of the mark. There are events here that are just too grim for the show to handle, and it’s jarring to watch it try to circle back to its signature fun and cozy vibes — endearing as those vibes still are. Though the stellar cast does their best to keep up the show’s comedic side, not even the combined charisma of five enormously talented Irish actresses is enough to rebalance the scales.

On review site Rotten Tomatoes, season two had a 6.6 rating out of 10 as of Sunday night, a comedown from 8.1 for season one.

Cool is a rule, but sometimes bad is bad. I'll have to see for myself.

Trivia: The youngest of the bad sisters is played by Eve Hewson, daughter of Paul David Hewson, a.k.a. Bono, of the Irish band U2. Thanks for reading. I will be back on Thursday.