There is reason to hope that it is not all bad.
- Consumer confidence in the economy is growing despite fears of inflation and recession.
- A tight labor market may be contributing to that sentiment.
- It still pays to be prepared for a recession by maxing out your emergency fund.
Is the US economy in good shape? Well, it depends who you ask. But the latest data points to the fact that Americans view the economy more positively.
The University of Michigan’s recent consumer sentiment index posted its biggest gain since August. And while the overall outlook is still gloomier than it was a year ago, it’s clear that financial concerns among consumers in general may be waning.
If you’re still skeptical about the state of the economy, you might be in good company. But here are some reasons not to give up.
1. The labor market is strong
In November, the US economy added 263,000 new jobs, far exceeding the 200,000 new jobs economists had forecast. Not only that, but the national unemployment rate has remained stable at 3.7%, which is comparable to where it was before the COVID-19 pandemic. A strong job market is an indicator of a solid economy, so it’s good to feel good.
2. Inflation appears to be moderating
Inflation levels are still quite high – there is no doubt about that. However, things seem to be improving.
The consumer price index, which measures changes in the cost of consumer goods, showed smaller increases in recent months than at the beginning of the year. And some retailers are reporting that their inventory costs are finally coming down.
In fact, a Walmart CEO recently revealed that prices on toys, sports equipment and clothing appear to be falling compared to months ago. And while there are only a few specific spending categories, any drop in prices today is positive news.
3. Recession warnings don’t seem so dire
At the beginning of the year, many financial experts were absolutely convinced that the US economy would go into recession in 2023. Now they say it is possible, but if the recession does hit, it may be mild.
Without a crystal ball, it is impossible to know which direction the economy is going. But still, it’s good to see some of these doomsday warnings waning.
It’s still worth preparing
The fact that Americans seem more optimistic about the economy than in past months is a good thing. But ultimately, it’s still important to prepare for the downturn. And one of the best ways to do that is to beef up your savings account.
The more money you can put aside for emergencies, the better equipped you will be to weather a recession. Plus, the extra savings can act as a buffer if inflation somehow turns around in 2023 and starts to worsen (an unlikely scenario, but worth preparing for regardless).
All told, “prepare for the worst but hope for the best” is a good rule of thumb to follow when it comes to the economy. And if you take steps to increase your savings, you’ll likely see your personal outlook change for the better.
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