This week, there has been some good and some bad news about our economy. The good news is that the economy continues to create jobs at a highly satisfactory pace without impeding the path to lower inflation. The bad news is that strains are clearly emerging in the financial system as a result of the serious problems in the commercial real estate sector. Those strains now risk upending the economic recovery before year-end.

Among the more surprising and welcome characteristics of today’s U.S. economy is that job creation continues at a strong pace of around 300,000 jobs a month. This is happening without preventing inflation from continuing downward the Federal Reserve’s 2 percent inflation target. Surprisingly, too, is the fact that maintaining unemployment close to a postwar low is not causing an undue acceleration in wage inflation. This is in marked contrast to what most economists had expected.

At the start of last year, the consensus was that the economy would have to go into a recession for inflation to come down. Now that this has clearly not happened, economists are starting to engage in a lot of soul-searching as to where their economic models got it so wrong.

Offsetting the good labor market news, this week, the New York Community Bank, a $100 billion........

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