Why the jobs boom could worsen inflation and help trigger a recession – ABC News

by | Dec 9, 2022 | Jobs

The economy has set off emergency sirens this year over growing recession fears, sky-high inflation and a battered stock market. But one area has allayed worries: jobs.Hiring last month exceeded expectations and defied warnings of a downturn. Moreover, in November, wages grew a blistering 5.1% compared to a year earlier, offering welcome relief for workers strained by price hikes.But the hiring boom could help send the economy into a prolonged downturn, turning the good jobs news into a grim omen, economists told ABC News.”It’s confusing for people and rightfully so,” Betsey Stevenson, a professor of public policy and economics at the University of Michigan, told ABC News. “How can a lot of jobs be bad for the economy?”A tight job market fuels rising wages, which often push companies to raise prices to make up for the added costs. In turn, inflation worsens and recession risks rise, they added.In addition, rising wages have offered less to workers than they appear to have at first glance, since income gains have trailed the pace of inflation, effectively slapping workers with a pay cut, the economists said.Here’s what you need to know about how the hiring spree could deepen inflation and help trigger a recession, while leaving some workers worse off:An inflation crisis puts pressure on the jobs marketRobust job growth could deepen inflation, but it isn’t the primary cause of the current bout of high prices, economists said. Like so many economic problems, inflation comes down to an imbalance between supply and demand.When billions of people across the globe faced lockdowns, they shifted consumption to goods like Peloton bikes and couches, in some case …

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