Despite desperate measures by the federal government, the likelihood of a recession over the coming years has risen. The Federal Reserve continues with a policy of economic tightening cycle, its most aggressive move in decades. It is the latest in a series of warnings by experts about the potential implications of rising rates. The easing of prices will come at the expense of economic growth, which will hit hardest the low and moderate-income groups in the absence of a stimulus check.
Economists warn that aggressive Federal Reserve policy triggered by the ongoing price spikes will herald low economic growth this year. There is a strong potential for a recession. A recession is declared when there are two consecutive quarters of negative GDP.
The US Gross Domestic Product is expected to drop at an annual rate of 2.4% in 2022 and 1.6% in 2023. This is way down from last month’s forecasts that called for a rate of 2.4% and 2% respectively.
The labor market is also predicted to struggle with a hike in rates by the Federal Reserve despite a remarkably healthy recovery from the pandemic-linked recession that started in 2020. The unemployment rate will go up from 3.6% last month to 4.3% by the end of 2023 and will cross the 5% mark by the end-2025. It will thus potentially wipe out the gains made on this front in the past year.
Economists caution that as the nation inches towards a potential recessionary phase, the action by the Federal Reserve to halt it will raise unemployment and slow hiring rates. The cure prescribed by the Federal Reserve could turn out to be worse for the US economy than the disease itself.
The Withdrawal Of Stimulus Checks Has Led To A Drop In Stocks
The withdrawal of the stimulus checks has hurt people in multiple ways. While it has taken away a lifeline before the economy could fully recover, it has also tanked the stock market and led to renewed fears of a deep recession.
With a growing realization that the federal administration would stay away from stimulus checks for the present, thanks to the total non-cooperation of the opposition Republicans, major stock indexes plunged into a bear market terrain earlier this month just ahead of the largest hike in interest rate by the Federal Reserve in close to 3 decades.
This gloomy sentiment has led to waves of layoffs. The recently rising real estate and technological stocks slid to new lows and witnessed the largest check of layoffs.
The Federal Reserve cannot stop the issues that have led to inflation on the supply side without harming the economy. At this point, it looks like they have resigned themselves to the fact that it is necessary.
The Worst Drop In Stock Prices Since 1970
The US stocks are going through their worst first half since the 1970s. There is rising concern over how the efforts to curb inflation will affect economic growth. Within the last two quarters, the S&P 500 index has slid by 20.6%.
Other major indexes also have dropped sharply along with stock in mainland Europe, the UK, and Asia. This newest threat comes in even as central banks around the world are trying to control soaring costs of living. Prices of essential goods like gasoline and food have jumped manifold.
Economists predict that the US will slide into a recession this year. the world’s biggest economy has increased interest rates steeply, hitting the low and moderate-income segment of the population even as the federal stimulus checks have been stopped starting this year.
States Step In To Support Residents With Stimulus Checks To Cover The Fresh Crisis
The federal administration is more concerned with reining in the high inflation rate that threatens to cross into double digits. Consequently, it has been left to the states to help residents with inflation relief payments to counter the high rates of all essentials including food and gasoline.
The prices of gasoline have doubled in the past two years and food rates have seen a steep hike. Around 14 states, mostly Democrats, will give special support to residents in the form of stimulus checks and tax rebates. The stimulus check amounts will vary from state to state as also the eligibility for residents.
California is among the latest state to announce a stimulus check for its residents. But it was the first among states to go for a stimulus check earlier with the Golden State Stimulus Check I and II.
For the present stimulus check, individuals making up to $75,000 annually will receive a $350 payment in October with couples who make double that could get a $700 payment. A family with at least a dependent stand to gain a $1,050 stimulus check.
Taxpayers in Colorado who have filed their 2021 returns by June 30 will receive up to $500 in September. The state Dept. of Revenue has let on that the final amount will hinge on the state revenue at that time.
From May, taxpayers in Delaware who had filed their state tax received a relief rebate of up to $300. Residents who filed the tax returns for 2020 receive the rebate payment.
Residents of Georgia who filed their 2020 and 2021 returns will receive a stimulus check depending on their filing status. Individual filers will receive $250 payments, household heads will receive $375, and couples filing jointly will receive a $500 stimulus payment.
Hawaii has announced a $300 stimulus check for residents earning $100,000 and below while others will receive a $100 stimulus check.
Residents of Idaho will receive a 12% rebate on their state tax form 2020 with $75 being the minimum payment check received by residents.
Residents of Illinois will receive a rebate of $50 for individuals earning 200,000 while those filing jointly should earn less than $400,000 to avail of the largesse.
Indiana taxpayers will receive a $125 refund on their 2021 tax returns while couples will receive double that.
Maine is sending the biggest payment at present in the US and filers earning $100,000 and below receive an $850 stimulus check directly through the postal service. Residents who have filed their returns for 2021 before May will receive the payments immediately. The last date for filing is October 31, 2022.