The pandemic catalyzed inflation in the United States, creating rifts in the supply chain while forcing the American government to pump stimuli into the economy. Services have become increasingly more expensive, as workers have been reluctant to return to pre-covid work. Factory closures have impacted food prices, while the Russian invasion of Ukraine has damaged gas and energy production, subsequently causing those prices to skyrocket. The federal reserve has been trying to raise interest rates to counteract the rampant inflation, but they have had little success. Inflation has leaked further into the American economy than just physical goods and services, threatening areas ranging from dental care to hotel rates. The Fed continues the strategy of increasing borrowing costs to slow spending, and then rein in prices, but the US economy remains at a 7.7% inflation rate*. This year, inflation has been at its highest level since the early 1980s, raising the price of goods at a rate that is significantly more than the growth of American wages.
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| US inflation over last 100 years |
For retailers, the fourth quarter is always the biggest as the holiday season approaches. Despite inflation, retailers can look forward to seeing some of their biggest earnings yet this year. Black Friday experienced a record-high 196.7 million people rushing back to stores to catch the best deals, while Amazon's online sales surged on Cyber Monday. Eric Swanson, an economics professor at the University of California, Irvine stated, “most people in America spend pretty much their whole budget anyway… So the money is going to get spent, it’s just a question of what it’s going to get spent on.” This is good news for big corporations, as though the average American is becoming significantly poorer relative to the costs around them, the large monopolies will continue to capitalize on their gains this holiday season. The healthcare and retail industries have not only been virtually unaffected but they actually have seen some of their largest profits ever this year.
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| Black Friday at Walmart |
But, most importantly, inflation is affecting how much the average American will have to spend during these holidays. Americans saw Thanksgiving feasts cost 20% more than last year, and 40% more than in 2020. The average box of stuffing went up 69%, pie crust went up 26%, and dinner rolls became 22% more expensive than last year. Turkey, the staple of Thanksgiving went up 21%. Its high cost can be attributed to not only inflation but a deadly strain of avian flu that wiped out 49 million turkeys this year. All in all, many Americans had to spend significantly more on their Thanksgiving feast this year.
As Christmas approaches, it is likely that we will continue to see the trends from Black Friday and Thanksgiving. The corporations will continue to flourish while the average American will be left seeing a lot less bang for their buck.
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*As of November 2022
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23 comments:
The Fed should reconsider it's approach to fighting inflation. They've been raising interest rates for months at an extremely fast rate, yet inflation still remains at record-highs. If the Fed continues to do this, it could doing much more harm than good, particularly to lower-income households who could be unable to afford loans due to the higher interests rates. Additionally, as much of inflation seems to be caused by supply chain disruptions and skyrocketing energy prices due to the war in Ukraine, raising interest rates won't fix these issues. Raising interests rates will likely lead to a slowing economy and an increase in unemployment, which will disproportionately impact lower-income households. Some interest rates are reasonable, but many the Fed seems to be going too fast and too far with these rate hikes.
With the pandemic and sanctions on Russia, it seems like the perfect storm that caused this high inflation. We are in a (mild) recession, which affects people all over the country. For example, the place I work at has had to find ways to cut costs and slightly increase their prices. Stuff like this increases the cost of living for Americans. Many people also blame Biden for the inflation, which is part of the reason why his approval ratings are so low. The brunt of the blame always falls on the government (even if the economic crisis isn't their fault). It will be interesting to see how this will affect the 2024 election.
As high inflation continues, the economic crisis worsens. As Niki mentioned, we are in a mild recession right now, and the detrimental effects of Russia's invasion on Ukraine for energy supply will continue to tax the daily costs of Americans. Even seen as a problem in Aragon's student-life, gas prices are still at an extreme high. Although raising interest rates at an extremely fast rate may have temporarily been a decent approach to alleviate inflation, it will not solve the problem. Large corporations with continue to benefit and lower-income households will suffer. Disrupting the already fragile financial situations of many will continue to slow the economy and get people laid off.
I agree with Andrew's point that the approach to inflation needs some tweaking. Raising interest rates is really only a temporary solution, and its effects have been quite limited. Like you said, increasing interest rates will likely result in an increase in unemployment. This is why the long-term effects of policy designed to address inflation should be more considered. Slowing down the economy and increasing unemployment will likely create situations that force the government to create even more policy. To prevent such a situation, I think it's important that the Fed looks a bit more into the future with regards to their inflation policy.
Conservatives and liberals alike love to blame inflation on workers asking for a living wage. In actuality, wages have been decreasing in terms of purchasing power. Corporations use inflation as an excuse to blame workers and cut pay while simultaneously increasing their prices. This is the main reason inflation is currently on the rise. Congress should be doing more to regulate profit-price inflation but of course they are instead spewing the nonsense the lobbyists tell them to say.
To add a little bit of nuance to Lucas' assertions, the "Great Resignation" has actually given many workers to power to negotiate better pay and working conditions. As the CNBC article I've linked below highlights, hourly workers had a .6% increase in earnings in November. The current worker-employer relationship seems a little more complicated than "an excuse to blame workers and cut pay." Rather, I'd say that it's a mix of both: corporations are always trying to maximize profits, and that often comes at the cost of employees. However, certain industries, such as the food industry, are seeing the opposite where workers are gaining power to negotiate their interests from employers.
https://www.cnbc.com/2022/12/02/forex-markets-inflation-jobs-data-interest-rates.html
https://www.uschamber.com/workforce/understanding-americas-labor-shortage-the-most-impacted-industries
I think everyone here is in agreement about the coming issues of inflation as wages are not able to keep up and the value of the dollar is lost while prices increase. I think a combination of wage increases, government handouts, and scarcity of recourses from the Russia-Ukrain conflict have driven consumers to maintain a high demand for products retailers and manufacturers are struggling to produce. Besides the federal government's current monetary policy of higher interest rates consumer spending has to be curbed and a decrease in demand to drive prices down. Right now it seems the government is doing more harm than good, and a reduction of spending may be able to allow the economy to correct itself.
I'm in agreement with the shared perspective in the comments above. The current data shows economic growth in the U.S. in terms of GDP in the 3rd quarter but the U.S. economy is far from stable. Following the period of the economic recession due to the surge of unemployment and slowed production brought on by COVID-19, one of the biggest threats to the economy right now is inflation. Inflation is disproportionately impacting lower-wage workers because, with inflation, wages that were considered reasonable are now lowered compared to the cost of goods and services. Consequently, further interest rate increases would hurt vulnerable individuals and damage the economy more.
I had been talking about this issue recently because I see it in my friends and peers every year. During Black Friday they spend overly excessive amounts of money; the subtotal being way more than they would spend on another day. They think they are getting a "GREAT DEAL!" or "60% OFF", but if one doesn't look closer and know about what they are purchasing, they could be walking directly into a corporate cash grab. Going over the top compared to normal shopping must come with mind for what you are purchasing and where it is coming from. Having knowledge on what you are buying will lead to a less steep curve of the economy of the U.S. people.
I find this post to cover such an interesting concept as it seems that inflation has gone mildly overlooked in the consumer sector. Especially focusing in on the holidays and the fact that the pandemic has started to “lift” in the eyes of many Americans it is no surprise that there is an evident increase in spending. To me, the most interesting is Black Friday and I think another interesting perspective to expand on this post is what Cyber Monday looks like. For the people who do feel the safest at home and not out with thousands of people during Black Friday would have most likely taken advantage of the deals on that following Monday that were found all online. Companies like Amazon and many other major online shopping platforms most likely had consumers seeing a major increase in their price when relatively the items used to be cheaper. As Lukas mentioned, it is also blinding during the holiday season to not focus “as much” on prices because there are so many apparent deals but in reality there is a massive economic inflation that needs to be highlighted.
I find this post to cover such an interesting concept as it seems that inflation has gone mildly overlooked in the consumer sector. Especially focusing in on the holidays and the fact that the pandemic has started to “lift” in the eyes of many Americans it is no surprise that there is an evident increase in spending. To me, the most interesting is Black Friday and I think another interesting perspective to expand on this post is what Cyber Monday looks like. For the people who do feel the safest at home and not out with thousands of people during Black Friday would have most likely taken advantage of the deals on that following Monday that were found all online. Companies like Amazon and many other major online shopping platforms most likely had consumers seeing a major increase in their price when relatively the items used to be cheaper. As Lukas mentioned, it is also blinding during the holiday season to not focus “as much” on prices because there are so many apparent deals but in reality there is a massive economic inflation that needs to be highlighted.
The challenge of modern day inflation is something that American has been struggling with since the beginning of the pandemic. Despite creating various social and health problems throughout the country, the pandemic brought about economic turmoil as well. With many stores and industries virtually being forced to shut down. Those effects have been exacerbated till this moment. Despite coming out of the pandemic, prices have continued to increase, creating an increasing detrimental problem for the average American. I think that while the feds are doing a decent job with increasing the interest rates, more needs to be done in order to control the retail market, as their increased profits are hurting the American public, which special emphasis in this holiday season.
I believe that the feds should prioritize stabilizing inflation since as such a large consumerist nation, we tend to overlook the consequences of inflation. A great example of inflation that grew far too out of control was the crisis in Zimbabwe where a $100 item was raised by billions of dollars in price. Though this is unlikely to replicate within the US, it is something to keep in mind as our inflation rates continue to grow. Furthermore, while this continuous increase in consumerism may benefit our economy, it also horribly impacts our environment and society's mindset around goods and products. As the holiday season comes around, it is important to stress renewable products, as well as resist the urge to succumb to "trends" that will eventually die out in the next month. Sustainability must be emphasized, especially during large consumer time periods.
As companies are getting hurt by inflation and begin to lose money, they lay off workers to reduce their expenses, creating lower levels of employment. Many of these people, especially older ones are not returning to the workforce, and the job demand going up without the supply matching is causing wage inflation which also contributes to driving the country's price inflation up. The inflation issue needs to be resolved and new policies should be enacted to prevent such circumstances from arising again.
As many of the comments say, I think that inflation has been overlooked. Personally, I haven't heard much in the news about it except for a quick mention of the annoyance of gas prices rising. I wonder if it isn't a large priority of the government and media because, as this post explains, large corporations aren't struggling as much as everyday Americans. People are still spending their money, just getting less for it. Companies are doing fine but it's normal Americans who will struggle to buy gifts for Christmas. This doesn't concern the government as much as if large corporations were suffering which is a shame.
I agree with other commenters and inflation has definitely been overlooked in the media. I believe this is partly to do with how inflation can be so easily and simply explained by the shutdown of manufacturing due to COVID. If the media covered inflation then more pressure would be established from the public and legislation would be pushed through congress to battle the inflation. I believe another big contributor to high participation in holiday consumption will be families wanting to have a larger holiday to make up for the previous COVID-ridden holidays. Already I see local malls filled with holiday shoppers and it is only the beginning of December. It will be interesting to see how much holiday shopping will increase this year compared to the last few years.
I feel like I haven’t heard much about inflation this year or last, and didn’t realize how much more expensive things were becoming until I was talking with my mom about the turkey shortage and turkey prices this year. Reading this blog post I think its pretty surprising that I didn’t notice much change in prices of everyday items despite such large increases. Like many of the commenters say, inflation doesn’t seem to be talked about that much in the media—maybe its because it might be considered “boring.”
Ever since the covid pandemic, there has been a rise in unemployment, poverty, which all ties to the inflation in America. The reason why so many people rush to stores during Black Friday to go shopping is because they want to buy things at a cheaper price because they cannot afford the original price. From online shopping to in store shopping, each family is trying to save their money in every way possible in order to survive in this country. I was on my snapchat stories one time, and my friend posted themselves at the Nike store at like 6 am, and there was already a line. Shoe prices, clothing prices, food, and even gas prices are just insanely expensive compared to like just a couple years ago. It's just insane how one would need to pay 80 dollars or even 200 to fill up their tank. Society's poverty is showcased in the items that are available to be purchased in stores, and at these expensive prices, these stores are just able to make more money that is used to pay for rent or groceries or whatever it may be. Because of the increase in gas prices and technological advancements these past couple of years, many people have turned to solar or electric cars because it’s more efficient: you can charge your car at home and not have to pay for gas for 6 dollars a gallon. An ever evolving economy will become a more and more expensive economy.
Similar to what other commenters have said, I also haven't heard too much about inflation recently (besides gas and used/new car prices going up). Hearing how much Thanksgiving meals have costed this year compared to previous years is astounding. As Nick established, COVID-19 is definitely a factor as to why inflation has increased so much. Additionally, disruptions in energy and trade paths from Ukrainian and Russian exports due to the Ukrainian war may be a contributing factor to the increase in food and gas prices. The combination of recovering from a two-year long pandemic and the ongoing war between Russia and Ukraine has increased prices globally.
Rapidly increasing inflation in the US is another reason why life for working class Americans is so difficult. People essentially lose all their savings and our forced to invest, when many don't have the knowledge or even time to do so.
Recent events have caused a massive change in economics of the US which can be attributed to many things including Covid, invasion on Ukraine, overall costs increasing, and other production issues. This creates an issue with spending as many Americans have not returned to work after Covid isolation and prices are so high while work pay is low. We’re seeing a drastic change in the job market as work was hard to find during Covid and wages are low thus impacting less wealthy households who struggle even more during this period of inflation. The notion that Americans are spending more during the holiday season suggests that there will be an increase in spending compared to other months. However, it is evident that although spending may begin increasing, due to inflation, people are having to spend more to get more, which is significantly more difficult for lower-income families who struggle to pay their bills to begin with.
I think this could just be the start of the economic downturn. While yes because of the Thanksgiving holiday and black Friday all consumer shops have had much higher revenue this year than the last two years thanks to Covid. We are also getting to see what the inflation rate has truly done and I believe its effects would be seen more drastic next year with oil and gas prices potentially hitting an all-time high again next year with the worry of Saudi Arabia and other countries like Egypt joining BRICS alliance which could be very harmful not only to the power of the dollar and cause inflation and the economy to crash but news coming from Saudi Arabia saying that the US might not be able to buy oil so cheap from them anymore. We can potentially see a switch to the global superpowers and how it will affect our cost of living to skyrocket again to new means.
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