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Tuesday, January 18, 2022

The true economic situation in the US.

Since the US is a service-oriented economy, it is heavily dependent on the retail sector for its employment.  We can see this high correlation between non-farm payroll employment and retail sales on the chart below.

The high inflation is causing retail sales to plunge and this will inevitably hurt the US employment rate later.  Therefore, the US has to resolve the high inflation urgently in the 1st half of 2022 because hiking rates in the 2nd half of 2022 will cause President Biden to lose his mid-term election in November 2022.

The high inflation is also causing lootings in the US.

https://edition.cnn.com/2022/01/14/economy/la-freight-railroad-theft/index.html

Therefore, the US Fed cannot afford to wait any longer or the unemployment rate will spike up later.  The US is facing a conundrum now because it has to hike its rates more aggressively in the 1st half to safeguard Biden's election.

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