The economic resilience of 15 states has contributed to the ongoing continued rise of inflation.
- Alabama, Arizona, Arkansas, Kentucky, Maine, Maryland, Mississippi, Montana, Nebraska, New Hampshire, Ohio, Pennsylvania, South Dakota, West Virginia, and Wisconsin are reporting the lowest unemployment rates since the late 1970s.
- Unusually low unemployment and high consumer spending in these states are one factor, with 45 states still facing economic whiplash from the pandemic and record unemployment rates, Fortune reports.
- 49 U.S. states, except Nevada, report unemployment below 5%, which marks the economist standard for “full employment.”
- The May Consumer Price Index (CPI) is scheduled to be announced by the Bureau of Labor Statistics on Tuesday, June 13.
- April’s CPI was announced at 4.93% year-to-year. National unemployment hit 3.7% in May.
Why It’s Important
High consumer spending has been a driving factor for inflation in the aftermath of the COVID-19 pandemic, with too many dollars chasing too few goods and services. As interest rates rise, the expectation is that unemployment will increase as the job market tightens and the economy enters into a recession. The Federal Reserve has been forthcoming since last year that its judgment has found that a short recession is less harmful than entrenched inflation and has thus attempted to reduce it below 2% annually.
These moves have not been without criticism. Senator Elizabeth Warren (D-MA) confronted Fed Chair Jerome Powell in a March Senate panel, arguing that the Fed’s interest-rate hikes are dangerous and that the ongoing inflation crisis is rooted in supply-chain stress, the effects of the ongoing invasion of Ukraine, and corporate greed. Treasury Secretary Janet Yellen disagrees with the claim.
As a principal, the Federal Reserve tends to act until it starts to break things, but it already accomplished that in April with three of the largest banking collapses in U.S. history being facilitated by negative effects on the bond markets. Powell announced the Fed’s tenth consecutive interest rate hike on May 3, but another hike remains unlikely given the circumstances.
The economy is showing signs that the interest rate hikes are having an effect. Rent prices are one of the largest expenses continuing to hold up inflation, and they are expected to decrease shortly. Decreased loan borrowing has reflected a widespread economic slowdown, although smaller businesses are being harmed. At the same time, the recent strong jobs report has rallied hopes of an economic soft landing with a minimally harmful recession.