New York CNN —As the year comes to a close, it seems that the market’s focus on inflation rates are shifting to a new area of concern: Unemployment. While the Federal Reserve has taken steps to fight inflation by curbing economic growth, the full extent of the damage to the employment market is yet to be seen.
Rising unemployment leads to an increase in the inflation rate
Low unemployment and wage growth may appear to be beneficial to a near-recessionary economy, but they have shown to be detrimental to markets.
Stock market crashed down early this month as a report showed a resilient labor market. Again on Thursday when the weekly numbers showed the number of Americans filing for unemployment benefits fell, indicating a still-tight labor market.
Inflation and unemployment alway been an opposite relationship, higher wage means higher inflation as companies pass on higher costs by raising the price of goods, Investors worry that a strong jobs report could fuel Fed officials to accelerate their rate increase campaign.
Investors are hoping for a Goldilocks situation where unemployment falls just enough to convince the Fed that its rate hikes have cooled the labor market enough to end hikes but not enough to cripple the economy. That’s a very narrow path to land on.
On Wednesday, the Fed published its economic prediction, which expected that the unemployment rate will rise to 4.6% by the end of the year, up from 3.7% now. The unemployment rate has never been higher outside of a recession, and those figures imply that around 2 million Americans would have to lose their jobs.
Jerome Powell expresses the strong job market is exceedingly responsible for inflation and will have to weaken before rate hikes end. “There’s an imbalance in the labor market between supply and demand,” he said, adding that it will take a “substantial period” to fix that imbalance.
The day before Christmas
Stores are drowning in a glut of merchandise this holiday season, keeping the discounts fast and furious in the runup to Christmas
The Saturday before Christmas — also known as Super Saturday — is typically the busiest shopping day of the November-December gift-buying period.
With Christmas Day falling on a Sunday, and Christmas Eve falling on the preceding Saturday, Super Saturday this year is on Dec. 17th. More than 158 million consumers are estimated to shop that day.
According to the NRF, shoppers have only completed half of their present shopping thus far. It is also costly for shops to keep an overabundance of items for an extended period of time. Retailers with their own warehouses and distribution centers have a limited amount of space to deal with, with some wiggle area for surplus goods.
However, the expenses build up if more room is required for a protracted surplus that cannot be cleared out soon.
Unsold products can lose value over time. This is especially true for fashion clothing, since astute buyers will not purchase last year’s style if the trend has passed. Stores are therefore obliged to severely discount, reducing profits.
This year, businesses were already giving discounts of 50% to 60% off and free shipping for online orders far before the final full weekend before Christmas.
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