- Paul Krugman believes the outlook for the US economy is better than a “Goldilocks” scenario.
- “We have an economy that is both satisfyingly hot and refreshingly cold,” he said Thursday.
- Krugman’s comments came after Bureau of Economic Analysis data showed that the US’s GDP rose by a better-than-expected 3.3% over the final quarter of 2024.
The US economy isn’t just headed for a so-called “Goldilocks” scenario – things are looking even better than that, according to Paul Krugman.
“This is not a Goldilocks economy,” the Nobel Prize-winning economist wrote on X Thursday, referring to a situation where growth, inflation, and unemployment are all at levels that look “just right”.
“Goldilocks found a bowl of porridge that was neither too hot nor too cold,” he added. “We have an economy that is both satisfyingly hot (GDP) and refreshingly cold (inflation).”
Krugman’s comments came after data published by the Bureau of Economic Analysis Thursday showed that the US’s real Gross Domestic Product (GDP) expanded 3.3% over the final quarter of 2024, blowing past forecasters’ 2% target.
Meanwhile, inflation has cooled from four-decade highs to just 3.4% as of December, while the unemployment rate is still hovering below 4% despite the Federal Reserve aggressively raising interest rates in a bid to clamp down on soaring prices.
Krugman has tended to take a cheery view on the economy in recent years, repeatedly championing efforts by Joe Biden and the central bank to bring inflation down to 2%.
Others on Wall Street have shared gloomier outlooks, though.
JPMorgan Chase CEO Jamie Dimon said earlier this month that he’s still “a little skeptical of the Goldilocks scenario”.
“I still think the chance of it not being a soft landing are higher than other people,” the billionaire banker told Fox Business. “It’s not terrible. It might be a mild recession or a heavy recession.”
Top economists like Steve Hanke and David Rosenberg have also flagged the possibility that the US suffers a severe slump in growth. Hanke said this week that he believes a recession will soon “start to bite”, while Rosenberg warned in August that it’d take a “miracle” to avoid a downturn.