US Economy: Experts fear United States could enter a recession if spending continues to slow
Americans are becoming increasingly worried as sky-high inflation is wreaking a terrible wrath on people in the US.
Despite positive unemployment figures and the end of nearly every pandemic restriction, the US economy is headed for the rocks. Inflation, currently standing at 8.3 percent year-on-year, is threatening to pull the plug on economic progress. Prices for some of the most neccessary commodities are at record levels, such as fuel and grain, without a clear end date for when things may get better.
The Federal Reserve has begun its plan to curb inflation by raising interest rates, though this is not expected to have a major effect on prices until 2023. The president has little to no powers himself to prevent it, especially as many of the factors remain outside of government control. With war still raging in Ukraine, some of the world’s most important products are stranded behind blockade or sanctions. Many experts are predicting a recession.
How likely is a recesion?
A recession is when there are two consecutive quarters of negative economic growth as well as high levels of unemployment. The last time the US was in a recession was in 2020 when businesses were closed and workers sacked as the covid-19 pandemic tore through the US.
Since then, the economy has been on a positive trajectory with unemployment levels similar to pre-pandemic levels. However, the inflation rate could lead to a slowdown as consumers stop spending their money due to prices. Increased interest rates will also strike the general economy in an attempt to halt inflationary pressures.
Predicting recessions is difficult. However, with growth falling to a negative 1.4 percent in the first quarter, the likelihood of further downturn is high. Inflation may have slowed by two percentage points in last month but prices are much more expensive than a year ago.
What have the experts said?
Various economists have been speaking to news outlets in the last week to dicsuss the challenges the US economy faces.
“We do expect we will see a recession by the end of next year, but this wasn’t the start of it,” the bank’s chief US economist, Matthew Luzzetti, told CBS News, referring to the first-quarter decline in growth. “We think we’ll see strong growth the remainder of this year.”
Another economist, Aneta Markowska, chief economist for Jefferies, an investment bank, was more positive in her belief that a recession won’t happen this year.
“I just don’t see what would cause businesses to do a complete 180 and go from ‘We need to hire all these people and we can’t find them’ to ‘We have to lay people off,’” Ms. Markowska said.