The united states economy is deep water, and it’s looking like we won’t be able to figure it out before severe damage is done.
“We are in a relatively hot economy, and that is being shown by the strong job market and the fact that wages have gone up 5.1% since last year,” said Stephan Weiler, a professor of economics at Colorado State University. “This is great, but the other thing driving this hot firepit is inflation, and that’s impacted the prices of everything from groceries to home goods.”
As we begin 2023 here’s what you may expect according to a former Federal Reserve research officer.
First, we are looking at a recession. From the beginning of December, inflation was at 7.7 which shows is lowered from the 10% its been at throughout most of the year, but still, 2-3% higher than what the federal reserve was hoping to achieve by this time. When inflation is high the federal reserve’s best tool is to use interest rates. They have raised the short-term interest rates 3 times this year, and slowed inflation by 2-3%. Interest rates do not solve the problem, but will slow its effects and as a secondary cause, lead to a recession.
Recessions can lead to many Americans losing their jobs, and this can be difficult for whole neighborhoods, even in a current job-strong market. While the US economy has continued to currently offer 263,000 jobs, and the labor market is doing well. One major issue is that the living wage has not kept up with inflation, as a result, it cost more money to purchase everyday items. Even in jobs that offer a cost of living bonus, the extra money goes to essentials, families that were buying prime rib in the beginning of 2022 are now checking the prices of top ramen. The hope is that the Fed’s increase in interest rates will show the desired results of reduced inflation, but sources say this may not happen for another year.
Inflationary Expectation
Inflationary expectation is when the consumer becomes numb to the rise in prices, an adapts to paying more than years prior. Due to this, the holiday season looks strong, consumers are buying, and the labor force is in full swing.
Inflation is currently worldwide, with Europe seeing a higher inflation rate than we are. The Federal Reserve is working on dealing with inflation and how it impacts the country and global economies.
