Economist on stock market surge: Investors may be 'irrationally nuts'. How grocery stores are handling rising food prices. US inflation rate hits year high. Maersk CEO: Port bottlenecks won't improve anytime soon. The US economy added , jobs in October.
Larry Summers: The economy is overheating but it's good for workers. The Fed rolls back economic stimulus. Janet Yellen: Inflation expectations remain well anchored. Munger: Communist China handles economic booms better than capitalist America. Your Thanksgiving meal will cost more this year. Supply chain crunch has Americans in a scramble. Just over a week ago optimism was running rampant.
Coronavirus cases were falling, businesses were getting back to normal and a flood of government financial aid was coursing through the economy. Then came a series of disappointing reports that suggested the economy is stumbling.
The U. Retail sales fell flat in April. And the rate of inflation shot up to 4. See: MarketWatch Economic Calendar. Read: A jobs report whodunit: The prime suspects for weak hiring gains in Apri l.
But is the picture fundamentally all that different? Furman and most Wall Street economists say … not really. How come? Rising vaccinations, declining coronavirus cases and companies fully reopen for business are primed to push the economy forward, especially with the government and Federal Reserve providing unprecedented stimulus.
Consumers as usual will take the lead. They are going to spend that money, the thinking goes, as they regain confidence in the economy and the security of their jobs. The increase in spending, in turn, is going to push companies to hire more workers to produce the goods and services that are now in great demand. Campbell Harvey, an economist at Duke University, agrees.
Last June, he likened the pandemic to a hurricane, which wipes out businesses and homes indiscriminately. Pandemic spending is akin to disaster relief, he argued.
But even with government aid, many small businesses have gone under or are struggling, he says, and that will leave a mark on the economy as a whole.
During the first wave of lockdowns and stay-at-home orders last spring, Mr Knoop says it was clear that industries that relied on in-person customers - like travel and some retail - were going to struggle, while others would more easily adapt to the "new normal".
What actually happened:. Mr Knoop was right - the pandemic decimated some industries and boosted others. Tech-heavy companies that delivered products or services to people's homes - like Amazon, Netflix, and Shopify —thrived. Meanwhile, entire industries like hospitality and transportation saw widespread collapse, with millions still out of work.
When the Dow Jones dropped nearly 3, points in a single day on 16 March , many panicked. But Mr Harvey predicted that as soon as viable vaccines emerged, the economy would rebound. The stock market has gone on to reach record highs since that record low on that March day, with the Dow Jones almost doubling in a year, reaching an all-time high of 34, While this boom is even bigger than Mr Harvey expected, he remains cautious about what this means for long-term economic recovery.
It's like oh, we're just back to exactly where we were. That is hard to buy," he says. Mr Harvey says market's dizzying rebound, combined with low interest rates, has led many people to make decisions with "rose-coloured glasses", from buying their dream home in the country to taking out a big loan on their business - and that could lead to more economic trouble down the road if the economy hits rocky waters again.
Something that could trigger another recession would be if new variants prove resistant to vaccines, or if there was a problem in vaccine delivery. Mr Harvey is critical of how Western nations have hoarded vaccines, noting that the longer other countries wait for vaccines, the longer the virus has to mutate.
While both Mr Harvey and Mr Knoop think the economy has made a strong recovery this past year, they also have concerns about the future.
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