Amid an uncertain recovery from the COVID-19 epidemic, the economy of the United States is displaying a mixed bag of positive and negative indications.
While some analysts point to healthy job data, others feel a recession is just around the corner.
In point of fact, there has been a steady accumulation of evidence suggesting that the red-hot economy is beginning to cool off over the past month.
A decrease in consumer spending shows that Americans’ capacity to continue shelling out cash on trips and at restaurants is waning.
The impact of rising interest rates is beginning to be seen in the housing market, and investment in the technology industry, especially in startup companies, is becoming increasingly scarce.
According to the widely followed monthly Consumer Sentiment Index published by the University of Michigan, consumer confidence reached an all-time low in June, the lowest level in U.S. history, on the back of soaring inflation and pessimistic views of the economy.
According to Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, inflation remained the leading concern of consumers, with 47 per cent of poll participants attributing a decrease in living standards to rising prices.
As a result of dramatically increasing mortgage rates, the housing market is beginning to crumble, and exporters are experiencing problems as a result of the strong currency.
According to the data provided by the United States Bureau of Labor Statistics, the consumer price index (CPI), which is a broad gauge of prices for everyday goods and services, increased at the quickest annual clip since November 1981 by a staggering 9.1 per cent in the last month.
The Consumer Price Index (CPI) for June increased from the previous four-decade high of 8.6 per cent in May and is higher than the 8.8 per cent increase that was expected by Bloomberg.
According to a study published by the Bureau of Labor Statistics on Thursday, the Producer Price Index increased by 11.3% from the same time a year ago in June, which is quite close to the record of 11.6% that was recorded in March.
A photograph shot on June 22, 2022, depicts the United States Federal Reserve building located in Washington, District of Columbia, the United States.
A major bank in the United States, Wells Fargo, said on Thursday that it is doubtful that the Federal Reserve will see any indicators of inflation falling down toward its target shortly.
Several economic experts think that a significant increase in interest rates could be on the horizon by the end of this month. Among these experts, a number of them anticipate an increase of one hundred basis points.
That would be even bigger than June’s hike of 75 basis points, which was already the largest increase since 1994.
According to Wells Fargo, “a recession is more likely than not next year,” and the bank also noted that it anticipates the United States economy to undergo a moderate slump in the first quarter of 2023.
According to Desmond Lachman, a senior fellow at the American Enterprise Institute, who spoke with Xinhua, “the economy of the United States is now headed for a recession” as a result of the Federal Reserve being excessively active in its efforts to contain inflation.
In addition, the Federal Reserve’s actions to raise interest rates and reduce liquidity are causing the bubbles in the stock market and the bond market to deflate.
According to Lachman, this will very certainly make the forecast for the economy look even worse.
A bright lining is the historically low unemployment rate, as well as the abundance of job openings. However, over the past two weeks, several corporations, including JPMorgan Chase Bank and Redfin, an online real estate agency, have declared that they will be freezing hiring or cutting back on the number of employees they employ.
Initial jobless claims increased to 244,000 last week, the highest level in eight months, according to data that was provided by the Labor Department on Thursday. This is the most recent indicator that the labour market may be beginning to calm down.
However, other economists maintain that the economy is in a healthy state.
According to Dean Baker, a senior economist at the Center for Economic and Policy Research, the state of the labour market is the most important aspect of the economy for the majority of people, and it is now in a healthy shape.
The rate of unemployment has remained unchanged at 3.6 per cent for the fourth month in a row now.
The cost of gasoline is listed on a sign at a petrol station in Los Angeles, California, in the United States.
According to Baker, “the overwhelming majority of people can acquire jobs and have the option to quit jobs that they don’t like.”
Baker remarked, “The sudden run-up in prices is extremely terrible news, but I think it’s likely that we’ll see this turnaround.” He was referring to the recent increase in prices.
“The problems with the supply chain, which caused the prices of a wide variety of commodities to skyrocket, are currently being brought under control.
There is a good chance that the prices of many of these products will go down in the next months “Baker said, adding that rent increases may level off in the coming weeks and months.
Despite low unemployment and an exceptional number of unfilled jobs, product markets are quite stretched and sensitive to shocks in various commodity markets, according to Barry Bosworth, a senior fellow at the Brookings Institution.
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According to Bosworth, the situation should become more manageable over the next few months if a significant supply shock in the energy markets can be averted.
In the meantime, the White House is getting the brunt of the outrage that Americans are experiencing about the rising costs of food and petrol, and the approval rating of Vice President Joe Biden reflects that.
According to the polling average compiled by Real Clear Politics, Joe Biden’s popularity rating is a dismal 38.6 per cent. That is a lower approval rating than any president has had at this time in his first term since the 1950s.
