Even though banks are failing, big companies are laying off workers, and the stock market has stopped moving, a box of eggs still costs more than twice as much as it did three years ago. No wonder many US people think the economy is in bad shape. So, what is really happening? Stick around to find out.
The US economy was doing great just two years ago. In 2021, the economy grew by 5.9%, which was the fastest rate in almost 40 years. Consumer buying and job growth were both boosted by the return of pandemics. Even though the cost of goods went up, companies did well because their earnings were higher than normal. But no one thought the economy could continue that kind of growth, and it hasn’t.
The economy grew at a yearly rate of just 1.1% in the first three months of this year. This was mostly because the Federal Reserve has been quickly putting the brakes on to slow inflation.
Since March 2022, the central bank has raised interest rates by 5%, which is a huge jump in borrowing costs in a very short time. This kind of shock has not happened to the business since the 1980s. Now, people are arguing about how bad this slowdown will be.