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Thoughts on the US Economy

The US Economy is still facing significant headwinds.  While core inflation remains moderate, real inflation can be expected to continue to be high as gasoline, food, and healthcare costs continue to rise and deterioriate discretionary spending as wages have not kept up.  Savings rates have also fallen by 32% since the middle of 2011, indicating there may be pressure on consumers.  While the holiday season went well, many experts believe that consumers used their savings to fund their consumption and savings are a finite stock.  Unemployment has shifted down, but numbers indicate that a significant portion of this may have been from people dropping out of the labor force or temp jobs from the holiday season.

Uncertainty also lingers around Europe, which has a heightened chance of recession while China is slowing down, which will also cause a slowdown in economies that supply natural resources.  While much of US consumption is endogenous, it is still possible that the US will suffer reduced demand for exports.  While the economy is showing sigsn of strengthening, it certainly seems that cautioun is in order as a strong case for recession risk can still be applied.

(I’m not saying one way or another, nor do I hope the US goes into a recession since I need a job when I graduate and as we all know, it’s harder to get a job when they’re not there...mabe I should go into business for myself?  If someone can find a way to sell bottled water for a 75% markup, I'm sure I can find something)