Home Future What’s up with the American economy right now?

What’s up with the American economy right now?

0


A strange confluence of factors—a prolonged labor shortage, supply chain disruptions, and chaos in the energy market—makes it hard to predict where the US economy is heading.

On one hand, unemployment is at near historic lows, job growth is strong, and consumer spending robust. Viewed through these lenses alone, the future looks bright.

But alas, there’s a pernicious visitor back from the 1970s and early ’80s: high inflation. Consumers see this most at the gas pump. The Russian invasion of Ukraine has roiled energy markets leaving many Americans paying more than $5 a gallon for gas. Add in pandemic-related supply chain disruptions and goods shortages related to factories shuttered for lockdowns, and our sunny financial skies face some headwinds.

In the middle of this potentially gathering storm is the Federal Reserve, trying to rein in the economy’s excesses without causing pain of its own. Economists once predicted that our post-pandemic economy would resemble the Roaring ’20s, and now a different “R” word is being bandied about: recession.

Suffice it to say, it’s a curious time to be an economist, as Laurence Ball of Johns Hopkins University well knows.

“It’s very difficult, if not basically impossible, to predict when recessions are going to happen,” Ball says.

“The economy kind of cruises along and takes care of itself, and then something completely unexpected happens to knock it off,” says Ball.

“Obviously, COVID in 2020 is an extreme example of that. But what’s notable about this period relative to the last 40 years or so is the high inflation. Now, inflation does not directly cause a recession. But the Fed’s efforts to control inflation by raising interest rates could cause one.”

Here, Ball shared what measures he looks at when assessing the nation’s economic health and why he’s hesitant to make predictions:

LEAVE A REPLY

Please enter your comment!
Please enter your name here