Amid fears of “vicious circle” scenarios, the US economy is gradually recovering

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Normal life is gradually returning in the United States, about a year after the Corona pandemic crisis, but there are real concerns about the great challenges posed by the crisis at the present time, especially with regard to inflation.

Close The Washington Post The US economy is emerging from the pandemic very quickly, but with a remarkable turnaround, as businesses and consumers struggle to adapt to a new landscape with higher prices, fewer workers, new innovations and a host of inconveniences.

In late February 2020, she says, unemployment was 3.5 percent, inflation fell, wages were up, and American companies were trying to recover from a multi-year trade war, then the pandemic disrupted everything.

But mass vaccination efforts and the steady decline of the virus this year have allowed many businesses and communities to reopen.

Yet Americans are faced with “rising prices, housing scarcity, slow delivery of furniture, appliances, and many spare parts, and there are millions of unemployed workers and millions of job vacancies.”

Prices rose 5% in a year, the highest rate in 13 years, according to the Consumer Price Index (CPI).

The Federal Reserve had said, a few days ago, that the rise in prices was “largely due to temporary factors,” and expected GDP growth of 7%, in 2021, compared to its expectation of 6.5% growth in March.

His unemployment forecast has not changed this year, and he remains convinced that full employment will be achieved by 2023 by returning to the pre-crisis unemployment level of 3.5 percent, which was the lowest level in 50 years.

The Reserve Chairman, Jerome Powell, said in a press conference, last Wednesday, that the economy has not yet fully recovered from the crisis, and stressed that “the course of the economy will depend largely on the evolution of the virus.”

The “Washington Post” newspaper said that the sudden rise in prices could exacerbate the crisis of affordability and reduce the ability of first-time homebuyers to buy.

Experts fear that there will be a rent crisis. Susan Wachter, co-director of the Penn Institute for Urban Research at the University of Pennsylvania, predicts a home rental crisis with rents skyrocketing next year.

In many areas, home prices are up 10 percent or more from last year, even in smaller cities that are attracting Americans to move because of their desire to live in places with green spaces and a sense of community.

The Greatest Danger and the Vicious Circle

Inflation is seen as “the biggest risk that could sink, or at least halt, the progress of the economic recovery,” according to the report.

Experts fear that persistent inflation will mean that workers will demand higher wages and companies will respond by raising consumer prices, “creating a vicious circle”.

Although the Fed expects this inflation to be a temporary phenomenon, “businesses and consumers are already changing some behaviors. Many companies are cutting back on products, and homebuilders are refusing to ensure prices stay the same for fear of rising costs.”

The report points to other changes, such as companies realizing that a large segment of the workforce can work from home. McKinsey expects that about a quarter of the workforce will work at least one or two days from home each week.

Also among the changes are the increased online demand for daily necessities such as groceries, and the e-commerce boom, which has grown at a three times faster rate, in the past year.

Experts expect that the “automation” that has grown during the pandemic, due to companies seeking to reduce the need for humans, will increase productivity and domestic production, but at the expense of workers who will be laid off a number of them.





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