Economic experts warn that a cost of living crisis is coming. Economist Mohamed El-Erian talked about that issue, and what it could mean for the United States economy.
He pointed to recent moves by the Federal Reserve to combat inflation, which may prompt a recession.
Other experts say recession risks are low. That said, even if a recession does not occur- El-Erian says consumers are facing a cost of living crisis that will have an impact on the economy.
What’s the biggest recession warning sign right now?
Short-term government bond yields are outpacing their long-duration counterparts. Historically, it’s a warning sign that economic growth is going to slow.
In recent days, the 3-year Treasury note has been running ahead of the 10-year and 30-year notes.
Watching the margin between them is a reliable metric for determining whether a recession is imminent.
Why is cost of living such an issue right now?
According to El-Erian consumers are struggling with inflation. Prices are up for consumers across the board, whether they’re shopping for a vehicle, or getting groceries at the supermarket. The federal reserve has tried to contain this by increasing rates- it could slow economic growth and hurt the economy.
“We are looking at a cost-of-living crisis. That’s what we are looking at for the next two quarters, three quarters, where the consumer is going to be hit hard by inflation, they’re gonna get hit hard by lower consumer sentiment,” El-Erian told CNBC.
What other economic factors point to a possible recession?
The latest data from the Job Openings and Labor Turnover Survey for February showed a gap of around 4.8 million between job openings and unemployed potential workers.
The rate of inflation is currently trending at 7.9%, which is significantly higher than economists prefer. Making matters worse- wages are also up significantly, but largely in response to rising cost of living.
“Overall, we are gonna go through a difficult period where the cost of living is going to be on everybody’s mind,” El-Erian added.
What states have lowest cost of living?
Several states in the U.S. boast significantly lower cost of living. For example, home prices are much lower, even amid inflation, in a number of states across the middle of the country.
– West Virginia
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