Home Stock Markets The Good News? Prices Are Easing. The Bad News? Your Job May Go Away

The Good News? Prices Are Easing. The Bad News? Your Job May Go Away

by WOOWinvest
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The Good News? Prices Are Easing. The Bad News? Your Job May Go Away

Commodity prices have plummeted in recent weeks as global demand has begun to slow. The S&P GSCI commodity index fell 17% last month. The average U.S. gasoline price has fallen back below $5 a gallon after reaching a recent peak in early June.

On the upside, the slump could be a sign that inflation has peaked. Consumer prices surged 8.6% in the 12 months to May, a 40-year high.

But on the downside, a slump in demand that drives down commodity prices could slow economic growth.

The economy already contracted at an annualized rate of 1.6% in the first quarter, and many economists expect a decline in the second quarter as well. The Atlanta Fed forecasts a 2.1% decline in GDP in the second quarter.

Former Treasury Secretary Lawrence Summers, now a Harvard economist, has frequently sounded the alarm in recent months about the possibility of a recession.

And he’s only getting more worried. “The risk of a recession in 2022 is significantly higher than what I judged six or nine weeks ago,” he told Bloomberg on July 1.

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Recession Statistics

Summers pointed out that in the past 65 years, inflation has never been above 4%, unemployment has never been below 5%, and the economy has failed to enter a recession in the next two years. The unemployment rate was 3.6% in May.

Summers told Bloomberg that a recession could become “a self-fulfilling process of high inflation and people’s reduced income.” Disposable personal income, adjusted for inflation, slipped 0.1% in May.

Meanwhile, JPMorgan economists cut their economic growth forecasts. “Our forecast is dangerously close to a recession,” Michael Feroli, the bank’s chief U.S. economist, was quoted as saying in comments by Bloomberg.

“However, we continue to seek economic expansion, in part because we believe employers may be reluctant to lay off workers, even in times of weak product demand.”

Economists see a one in three chance

Jack Kleinz, chief economist at the National Retail Federation, also thinks the economy will avoid a recession. “I’m not betting on an official recession anytime soon, but recent research suggests that the risk next year is about a third,” he said in a statement.

“This will be on the verge of 2023. At the same time, a recession-free economy is not impossible.”

The National Bureau of Economic Research officially determines when a recession will occur.It defines recession as “involving[ing] The marked decline in economic activity spread across the economy and persisted for more than a few months. “

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