Effects of Consumer Spending by Saeed Arellano

The New York Times: "U.S. Economic Growth in First Quarter Was Milder Than Initial Reading"

saeedarellano — 2024-06-02 17:23:25 UTC

Ben Casselman argues that despite the slowdown in economic growth, the job market remains strong due to unemployment being low and wages rising.

Summary

saeedarellano — 2024-06-02 17:26:57 UTC

According to the article, a decline in GDP growth to 1.3% indicated the first quarter of the year saw a decrease in economic growth. Because of inflation, the rising of prices, and interest rates being high, consumer spending has been the glue that holds the economy together. Despite these changes the economy remains strong with unemployment at low levels and wages of people increasing, demonstrating strong consumer confidence. For instance, the minimum wage of all fast food workers in California increased to $20 (Fast Food). By having economic resilience, this shows how crucial the role of consumer spending is in a economy. Although there is inflation, and interest rates are high, the state of the economy suggests that the chances of of having a recession is low.

Unemployment

saeedarellano — 2024-06-02 17:27:02 UTC

A lower unemployment rate indicates that the economy is doing better. According to the article, the unemployment rate has decreased and there has been an increase in wage. The factors that help unemployment rate to decrease are an increase in demand for workers. Also, having a comparative advantage for goods will allow for more export of goods, meaning more people will need to be employed or work more hours to meet the demand of exporting goods for other countries. As a result of a lower unemployment rate, the economy remains stable regardless of the increase of inflation and high interest rates.

Economic growth

saeedarellano — 2024-06-02 22:06:12 UTC

Economic growth is represented as how much a country's economy increased in size and we use GDP to help us analyze the the economy's growth. According to Casselman, "an alternative measure of economic growth based on income rather than spending, cooled to 1.5% in the first quarter, from 3.6% at the end of 2023" (Casselman). Casselman's words demonstrate that although the economic growth has slowed down in the past few months, there should not be a recession. In this article, it emphasizes that due to consumer spending remaining strong, and since the the spending is justified by rising incomes, the economy will remain resilient at a slowed rate of growing.

Inflation

saeedarellano — 2024-06-02 22:07:33 UTC

Inflation is the rate of increase in prices over a given peroid of time. The target rate of inflation is 2%, and a country's economy does not want to be over the 2% threshold. However, according to the article, "Consumer prices rose at a 3.3 percent annual rate in the first three months of the year", meaning inflation is at 3.3%. The purpose of inflation in the article is to demonstrate depite being over the 2% target rate of inflation, the economy remains strong with unemployment rates being low.

AS/AD diagram

saeedarellano — 2024-06-02 22:08:52 UTC

AS/ AD Analysis

saeedarellano — 2024-06-02 22:09:06 UTC

According to Casselman, the economic growth of the U.S economy has decreased. Hence, the AS/AD graph demonstrates decrease in the AD graph. The graph demonstrates a decrease in the supply of money that lead to an increase on interest rates. Since interest rates rose, this lead to a decrease in investment, which led to AD decreasing.

Fred Graph and Descritiption

saeedarellano — 2024-06-02 22:09:31 UTC

The above graph demonstrates the U.S economy's inflation rate as a percentage. The graph demonstrates that a year ago in 2023 the inflation rate was set at 3.4%. Between the months of October - January of 2023, the inflation rate remained 3.7%, however, rose recently to 3.9%. High inflation rates means less of the supply of money. You can also relate this to the AS/AD graph because of the high interest rates, this means supply of money is low.

Conclusion

saeedarellano — 2024-06-02 22:09:46 UTC

America's economy is always fluctuating as a result of changes in economic growth, inflation, and unemployment. When economic growth decreases, it indicates that the economy has slowed down due to high interest rates as the article demonstrates. Although inflation is at a high, the low unemployment rate is keeping the economy stable. But most importantly, the consumer spending is the essential piece of the puzzle for the economy to not enter a recession. With more and more places hiring and wages rising, consumer spending will continue to rise.

WORKS CITED

saeedarellano — 2024-06-02 22:09:50 UTC

Dir, and State of California. Fast Food Minimum Wage Frequently Asked Questions, www.dir.ca.gov/dlse/Fast-Food-Minimum-Wage-FAQ.htm. Accessed 02 June 2024.

Casselman, Ben. “U.S. Economic Growth in First Quarter Was Milder than Initial Reading.” The New York Times, 30 May 2024, www.nytimes.com/2024/05/30/business/economy/us-economic-growth-first-quarter.html?searchResultPosition=9. Accessed 02 June 2024.