More than two years into the COVID-19 pandemic, uncertainty about how the health crisis will unfold continues to hamper businesses in the United States
“Until we’re sure how many people will be working from offices, it’s difficult for restaurant owners who serve people in offices to know how many people to hire or how large the order space should be,” said Peter Goodman, global economics correspondent for the New York Times, told CBS News “So there’s all sorts of uncertainties within the economy.”
For example, at the start of the pandemic, people crouched down and swapped gym memberships for home workouts. However, the long-term impact on consumer behavior is difficult to predict and poses challenges for businesses.
“People spent a lot of money putting exercise machines in their basement gyms while they were in lockdown,” Goodman said. “How many of these people are go back to the gym? What does that mean if you run a gym?”
While Americans have been quarantined at home, there has been a surge in demand for a range of goods as supply chains collapsed. The system has yet to fully recover.
“We’ve hit the global supply chain – we’re still dealing with the aftershocks from that. That’s a big source of inflation that we’re dealing with,” Goodman said.
Rising consumer demand, coupled with disrupted supply chains, is also behind the rising inflation currently hitting Americans and others around the world. Central banks around the world are moving to raise interest rates to tame inflation, which is slowing economic growth.
When borrowing costs go up, “you’re less likely to borrow, you’re going to spend less, and you’re less likely to hire,” Goodman said. “That cools the economy and prices go down.”
But deliberately slowing a country’s economic growth also reduces job opportunities and shrinks the markets where companies can sell their goods, he added. “You raise interest rates when you’re worried about inflation; You lower interest rates if you worry about not enough jobs and not enough growth.”
There are also additional variables at play that are deepening fears of a recession. The persistence of Russia’s war against Ukraine is driving up energy costs around the world.
“The Fed has no leverage to pull to get Vladimir Putin out of Ukraine,” Goodman said.
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