Recessions help with the making adjustments

Perversely, a recession may fix many things such as the labour shortages but the balancing act that remains is that higher prices leads to lower demand which leads to frugality and lower GDP.

Declining demand will lead to rising inventory which translates into falling prices.

If interest rates climb in order to stifle inflation, it will also increase the cost of servicing debt which will also affect consumer activity.

If a recession occurs and corporations are experiencing declining margins and lower sales, they in turn will cut their workforce.

There will be more labour available but the amount of job openings that we see now, may not be there.

This falls into the category of ‘being careful what you wish for’.

Keep in mind that servicing ones consumption, property speculation and indebtedness sometimes doesn’t matter, until one has lost their job or had difficulty finding one.

Opening paragraph from this story link is, “Employers posted a record 11.5 million job openings in March, meaning the United States now has an unprecedented two job openings for every person who is unemployed.”

May 19, 2022
by Rob Zdravevski
rob@karriasset.com.au

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