It’s no secret that many Americans are experiencing financial difficulties at the moment. Not only has inflation drove up living costs, but the Ukraine situation has also pushed up gas prices. Due to the fact that many people lack access to savings – either because they emptied their cash reserves during the pandemic or because they never had money in the bank in the first place – a large number of households are actually unable to make ends meet.
Indeed, many impoverished Americans hope that legislators will grant a fourth stimulus payment. However, for that to occur, the US economy would have to take a severe turn for the worst — specifically, into recession zone. That is not the case at the moment – despite the fact that recession lights are already flashing.
Are we on the verge of a recession?
Despite inflation, the US economy is doing well at the moment. Indeed, one could argue that inflation is a sign of a robust economy, despite the fact that it disproportionately affects cash-strapped individuals.
Often, when demand for commodities exceeds supply, the cost of living will rise. Furthermore, great demand shows that people have money to spend.
Meanwhile, the US labour market remains healthy and robust. There were 11.27 million job opportunities in February, roughly 5 million more than there were unemployed individuals. Jobs were significantly harder to come by the last time stimulus cheques were distributed.
However, the bond market just sent a signal that historically indicates the onset of a recession: an inverted yield curve for US Treasury bonds. Longer-term bonds often offer a higher rate of return than shorter-term bonds. What is the reason? Long-term investors assume a greater degree of risk.
The yield curve momentarily inverted earlier this week, meaning that the yield on the 10-year Treasury bond fell below the yield on the two-year Treasury note. And, while the inversion was only short, it will be interesting to observe whether it occurs again.
To be clear, there is no reason to warn of an impending recession. At the same time, economic conditions are far from severe enough at the moment to justify a fourth stimulus cycle. And that is something that Americans must accept.
Making ends meet in times of high costs
Unfortunately, cash-strapped households nowadays may be forced to take on additional labour in addition to their normal jobs in order to offset rising living costs. The good news is that the gig economy is rife with such chances. Thus, those willing to make that effort may be able to increase their earnings sufficiently to cover the expenses that their normal salaries cannot cover.
Of course, if conditions deteriorate enough, lawmakers may begin discussing a fourth stimulus package. As it is, some politicians are advocating for a gas-specific stimulus that would be payed during periods of extraordinarily high gasoline prices, as is the situation today. However, the gas stimulus is still just a notion – and it’s not a windfall anyone should bank on just yet.