It’s been a turbulent time for the United States economy. The inflation rate reached new heights in the last CPI report in August, rising by 8.3%; the Federal Funds rate was increased by 75 basis points to a new record high from 3% to 3.25%. 

The labor participation rate was at 62.3% in September, a lower number than economists hoped to see. This data measures the amount of the population in the US that is either working or seeking work. 

It may seem like just another statistic, but in reality it adds context to a story that’s been developing for months, if not years. 

Businesses need employees to continue staying open and in production. If there is a shortage of workers in the market, businesses have a huge incentive to retain their onboarded and trained employees. This was seen in the forms of sign on bonuses, flexibility in hours and higher pay, which is another contribution towards inflation. 

In addition, the report shows a slight decrease in the rate of wage increases, which can be considered a win for the Fed, as this is a sign of a cooling labor market that could help to ease inflation. 

In economic terms, this is creating pressure in the economy that could be alleviated with more labor supply in the market. 

Additionally, the economy overall is seeing a slowness in consumer consumption. A bulk of the disposable income that was saved by households through the pandemic has been spent in the past year. Most consumers purchased the big ticket items they wanted, and with recent high inflationary conditions, have cut down on their spending. 

This is bad news for retail stores like Kohls and Target, which have been in headlines recently for having too much backed-up inventory and nowhere to store it. Their only option is to offer large clearance sales. 

This is a delicate balancing act for executives who have to manage how much inventory to purchase in order to ensure a profit. Calculations, such as consumer propensity to spend money and the overall health of the economy, have to be taken into consideration to evaluate inventory purchases. 

There is another ship on the American economic ocean: the holiday season. 

Once Halloween is over, Thanksgiving will be a blur and the Christmas season of shopping will begin—or will it? 

There have been mixed opinions as to how much money Americans will spend this holiday season. It will become more apparent as the time draws nearer.


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