The economy is acting weird. Not even economists can fully say why.
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It seems we’re living in an economy that doesn’t make so much sense. There are so many contradictory trends swirling. Interest rates are rising, yet employment is robust, as is spending.
“Things have not moved in concert the way that they have in the past,” said Damon Jones, an economist at the University of Chicago.
People aren’t only spending on necessities like housing, gasoline and health care — things that have been heavily impacted by inflation. They’re also having fun, eating out and traveling. It’s almost like a tale of two consumers.
“Well, there are 330 million people in the U.S. You know, you’re not going to be able to throw a blanket over everybody under one sort of set of financial circumstances,” said Greg McBride, an analyst at Bankrate.
It’s getting harder to explain consumer behavior, he said, because the gap is growing between people who can keep up with rising costs and people who can’t. Some are sitting on substantial savings and some are racking up debt.
“It’s not just the spending on credit cards, but it’s the amount actually being revolved that is on the rise as well,” McBride said.
Whichever way people are spending, it’s still a puzzle why they’re continuing to spend. A lot of economists are willing to admit they just don’t know why. That includes Ori Heffetz, an economist at Cornell.
“I talk to you with a grain of humility. We have been surprised again and again.”
Surprised about the quick recovery, surprised that inflation is so sticky and surprised that despite everyone’s sour spirits, they’re still spending.
“It may be, in many ways, a new economy,” Heffetz said.
Economists make predictions based on history, and history tells us very little about this moment. Maybe something bigger is happening here. We just may be too close to it to see it.
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