The US economy faces a new threat

The biggest danger facing the American economy for years has been inflation.

The biggest danger facing the American economy for years has been inflation. Now, another problem is emerging as a credible threat on the horizon: Unemployment. Just as inflation continues to cool, yellow lights are flashing in the still-strong jobs market. The Federal Reserve must now confront the risk that it’s making a mistake by keeping interest rates too high for too long. That’s why some economists are pleading with the Fed to ease up its inflation fight—before high interest rates, which it’s used to tame surging prices, grind the US economy into a recession. “It’s time to cut rates,” said Joe Brusuelas, chief economist at RSM. “Inflation is fading as the primary focus of concern. The balance of risks is slowly tipping towards higher unemployment.” Mark Zandi, chief economist at Moody’s Analytics, said the labor market is straining under the weight of high borrowing costs.