Wednesday, November 9, 2022

The Health of the US Economy Today

It’s November 9th, 2022 and where does the United States Economy stand as of now? After two consecutive quarters of negative growth, the economy now has shown its first positive upward trend at 2.6%. However, in our current economic conditions, the inflation rate is at 8.2% according to CNBC. Keep in mind, the economy two years before had an inflation rate of just 1.23% 2020. The inflation rate in the United States has increased over 7% in the last 24 months. So, while it is comforting that our economy seems to be on an upward trajectory, it is still worrisome that it took so long to upturn and that the inflation rate remains so high. This percentage can convey two things. One, there is an optimistic outlook on the positive side and two, this is also concerning because of how slow it has taken to recover and there may be a sign where it goes under again. 

The United States economy became recently positive due to a narrowing trade deficit. According to CNBC, “economists expected this and consider it to be a one-off occurrence that won’t be repeated in the future quarters. GDP gains also came from increases in consumer spending, nonresidential fixed investment and government spending.” Inevitably, caution needs to be taken with the economic playfield at this moment. Many Americans today are not spending as much as they were before the inflation rate increased. Consumer spending might be up, however, that doesn't mean consumer spending is at an all time high. GDP may also increase, however that doesn’t benefit many who are suffering other issues like job loss, lay-offs and or other situations


The United States economy as of now has shown indicators that it can recover and it can grow upward if certain conditions are followed correctly. Many of those conditions rely on the size of the workforce and productivity in this current climate. The size of the workforce matters, and data shows that only 164 million individuals are employed as of September. Compare that to September of 2021 which only had 161 million individuals employed. Even though there is a noticeable increase, it is a small one that is concerning due to how slow employment has recovered ever since the pandemic. A slight 1.5% increase in employment participation rate is still a cause of concern, possibly explained by the great resignation which has currently hindered job growth.


So what does this all mean? Under current economic conditions, the economy has underperformed in contrast to 2020. The verge of a standing recession is still in play, however, we are more prepared now than we were in the economic crisis of 2008. According to Steve Hanke, an applied economics professor at John Hopkins University explained, “The probability of recession, I think it’s much higher than 50% — I think it’s about 80%. Maybe even higher than 80%.” The question now lies is what kind of factors will contribute to a staggering recession in such a precedent that we have not faced in over 14 years? There are many factors that contribute to an economic collapse. These include high interest rates, declining home prices, deregulation and wage price warfare. However, one factor that has become unique in the current economic crisis is student loans. According to Investopedia, “Some experts believe that student loan debt could bring down the economy in much the same way as the 2008 and 2009 mortgage crisis.” Student loans are at an outstanding $1 trillion currently. For comparison, in 2010, student loan debt was at $100 billion. The increase of this kind of debt is astronomical. To add insult to injury, college tuition has skyrocketed past the percent of the inflation rate. Combine unaffordable college education with the current economy not being able to put the graduates to work causes economic fatigue and stress. Consequently, many college graduates who cannot pay back their loans will likely suffer bankruptcy.


As we continue to deal with our economic conditions, it is important to stay aware and protect your finances ahead of time. Individually, we can do our part, however, the other half comes from our elected representatives in government. The fate of economic progress and prosperity falls on the laps of our federal government. This year in particular, is of much importance with the looming midterm elections having taken place. Both political parties in congress have an opportunity to come together and pass legislation that can help take relief on many Americans who are employed, becoming employed and retiring.


Here to help and Inform, 

Your Financially Fit Team


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