US Economic Conundrum: Will Rising Interest Rates Affect Spending or the Job Market First?
It is a classic economic puzzle akin to the chicken-and-egg dilemma: as interest rates reach their highest levels in over two decades, which vital component of the economy will give way first?spending or employment?
When consumers tighten their purse strings, businesses experience a drop in revenue, and this, in turn, can lead to layoffs as profits dwindle. Conversely, when companies reduce their workforce, individuals find themselves with less money to spend. It is a delicate dance, and the intricacies of this relationship remain a subject of much debate among economists.
For now, it appears that spending remains robust, and businesses continue their hiring spree. The key question is why? Some contend that the robust job market is driving consumer spending, while others argue that strong consumer demand enables employers to maintain a solid hiring pace.
Consumer spending plays a pivotal role in the US economic landscape, contributing to approximately 70% of the nation's economic output. Consequently, it acts as a litmus test for the overall health and trajectory of the American economy.
Determining which will weaken first?spending or hiring?entails consideration of various nuances. Factors such as the lingering effects of pandemic-era savings, varying degrees of pent-up demand for specific goods and services, and the ever-evolving economic landscape across different business cycles all come into play.
VIEW FULL ANALYSIS VISIT - FXOpen Blog...Disclaimer: This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
