We’ve all heard about the recent turmoil on the news or been shocked by prices in a shop. It’s clear that the United States’ economy has a lot of interesting things going on. But what does it all mean and why is everything so expensive? Here are some key points you need to know about the economy in the past few years and how it is affecting us.
Since the pandemic, we’ve faced numerous issues. The COVID lockdowns led to many small businesses taking a hit, some even shutting down altogether. There were also many jobs lost, and certain sectors like travel slowed heavily. The pandemic also caused a housing crisis and disrupted supply chains, some significant factors that have contributed to inflation up until today, making most things more expensive.
The inflation rate is currently around 2.8%. While this is above the target of 2% it is close to pre-pandemic levels, a stark difference from the 8% rate seen in 2022. However, this simply means prices are not rising as rapidly anymore. The sharp increases from the pandemic are not being undone, and people’s income did not keep pace with the prices. As a result, it is now hard for the average person to afford rent, groceries, and many other goods and services, even as the inflation rate improves. Even though inflation in small amounts is normal, the issue is that wages are not rising along with the prices, making everything unaffordable. This also leads to more consumer debt as people struggle to afford necessities.
The inflation rate is currently around 2.8%. While this is above the target of 2% it is close to pre-pandemic levels, a stark difference from the 8% rate seen in 2022. However, this simply means prices are not rising as rapidly anymore. The sharp increases from the pandemic are not being undone, and people’s income did not keep pace with the prices. As a result, it is now hard for the average person to afford rent, groceries, and many other goods and services, even as the inflation rate improves. Even though inflation in small amounts is normal, the issue is that wages are not rising along with the prices, making everything unaffordable. This also leads to more consumer debt as people struggle to afford necessities.
Recently, President Trump has also introduced tariffs on goods from several other countries. The affected countries are retaliating by implementing their own tariffs, and this could easily lead to an escalating trade war in which the price of any imported goods could rise excessively. His immigration policies will also harm industries which hire a lot of immigrants such as agriculture and healthcare, which could potentially lead to food and healthcare services becoming more expensive. Tariffs have also been affecting stock prices.
Interesting activity can be seen in the stock market as well. Many major tech stocks have fallen recently, as well as index funds like Nasdaq and S&P, which reflect the market as a whole by following the behaviour of multiple companies’ stocks rather than just one. These types of funds and stocks are popular investments that make up large parts of many people’s portfolios. If you own these, your account value may drop lower in the short-term. Such things can make good investments for the future, but the temporary dip could mean having less money in your account for the next few months or years.
As people struggle to afford necessities and get jobs, businesses will be harmed and spending will decrease. This overall reduction in economic activity is a recession, and we may be headed for one soon. But what can we do to survive it? Since the stock market will be down for some time, having an emergency fund of cash is a good idea since it retains its value without fluctuating as stocks do.
What is your opinion on the economy? Let us know @HerCampusSJSU!