Ugly Inflation Numbers Make a Recession More Likely in 2022

A recent Bloomberg survey of economists indicates that there is a 47.5% chance of a recession in 2022. Inflation continues to increase, showing few signs of slowing. The consumer price index posted 9.1% year-over-year inflation last week. But fears of future deficits are fueling inflation. This article will explore some of the factors that contribute to this rise in the consumer price index.

Unemployment rate remains unchanged at 3.6%

While most banks remain bullish about the U.S. economy, economists at Bank of America and other banks are getting less optimistic. Despite a recent drubbing for the stock market, most economists are warning of a looming recession this year. High inflation is putting off Lån med Betalingsanmerkning – 8 Gode Banker Som Hjelper Deg , but the Federal Reserve is doing its best to combat the problem with higher interest rates. Rising interest rates will make borrowing more expensive and slow down the economy, which will lead to a recession.

Although the inflation numbers remain ugly, they are starting to look better. The June jobs report was better than expected, but unemployment rates remain stubbornly high at 3.6%, barely above the low prior to the coronavirus pandemic. The Fed has to act quickly to stem inflation and keep the economy humming. As a result, they have been targeting inflation instead of job growth.

Rising wages have been the main benefit of elevated job openings and quits

As the US labor market continues to sour, many businesses are making efforts to retain top talent by increasing wages and benefits. According to the Economic Policy Institute, 68% of US CEOs are increasing wages in order to meet rising labor costs and boost consumer spending. While raising wages is a tried-and-true strategy to attract and retain top talent, a number of workers are quitting their jobs to seek out safer environments. The number of quits in the transportation and accommodation sectors is particularly high, at 186,000.

Across industries, the largest gains were recorded for the information sector, which includes software publishing, internet search portals, and company management. In this sector, the average weekly wage grew by 12.3% to $2,740, almost as much as in the previous year. Meanwhile, managers’ pay increased by 12%, from $2,513 to $2,793, almost as much as in the previous year.

Fears of future deficits can cause inflation

A looming recession is one of the main causes for the slowdown in the U.S. economy, and it will dampen consumer spending in the short term. Fears of future deficits will cause consumers to become cautious, delaying expansion plans and cutting hiring plans. Meta has already begun to reduce its workforce. The Fed’s actions in 2022 will only serve to exacerbate the deficit problem, as it will weaken the value of the dollar and lead to increased unemployment.

While a recession typically results from a lack of demand, it can also result from a shortage of money. Although 2022 is unlikely to see a recession, the risk of inflation remains elevated. Rising energy prices have dampened consumer confidence, and deteriorating business sentiment could weigh on the macroeconomic outlook. The Fed is expected to begin tapering its quantitative stimulus program by mid-2022, and increase short-term interest rates at that time. Since monetary policymakers typically react with a one-year lag, it is possible that a recession can happen after a year.