Read past installments here. This past week has seen a dizzying amount of economic news. We learned that Gross Domestic Product GDP declined for a second quarter but consumer spending and jobs are still growing; the Federal Reserve continues to hike interest rates at a brisk pace; and inflation continues to run hot. Making sense of all of these indicators is challenging, made even more so by the unique ways the Covid pandemic continues to affect life and the economy.
This Economic Update highlights what the latest economic news means for New York City, which is still far behind the national average in recovering jobs lost from the Covid economic shutdown.
It describes why the economy is slowing down and what that means for New Yorkers still looking for work. It details how new Congressional actions to invest in manufacturing and the transition to renewable energy can boost growth despite the slowing economy. First, the inflation over the past year has been driven in part by price increases in basic necessities, like gasoline, utilities, food, and housing.
This leaves people less disposable income for goods and services that could more demand-led growth elsewhere in the economy. Last week, the Federal Reserve raised interest rates an additional 0. Raising interest rates raises the costs of new borrowing and discourages investment. That will have the effect of slowing the return of pandemic-affected jobs and other job growth.
Higher unemployment will mean lower household incomes and less demand for goods and services, which may result in lower prices as well. This is how raising interest rates is intended to work. As of June, New York City was still , jobs 4. Many of those missing jobs are in industries that were fundamentally transformed by the pandemic β from education to retail and restaurant service β and are occupations that disproportionately employ Black and Latinx workers, women, young people, and those with a high school education or less.
