How inflation, rising gas prices and Ukraine conflict is affecting U.S. economy

Rising inflation and gas prices, supply chain shortages, the conflict in Ukraine, an uncertain job market and low interest rates are combining to create an unsettled short- to medium-term outlook for the United States economy.

Michael Jones, PhD, the Kautz-Uible Professor of Economics at the University of Cincinnati Carl H. Lindner College of Business, recently was interviewed on “The Kentucky Side,” a podcast hosted by Michael Monks, to discuss these pressing economic concerns.

The so-called “Great Resignation” isn’t helping matters. Jones said even though unemployment rates are at record lows, many people – especially those close to retirement with stable 401(k) plans – have decided to leave the workforce. Also, workers are seeing increased power, moving to other companies if their needs are not met due to the wealth of jobs available.

“I think what’s interesting to tie all these threads together is when we start talking about the increase in gas prices, now that workers have the flexibility to work from home, I think that’s going to help a little bit in mitigating this run-up in prices because as consumers’ demand for oil starts to change, they’re going to adjust their behavior as well,” Jones said.

A possible tool to combat inflation is to increase interest rates, of which Jones said, “have been very low for a long time.”

“If you want to bring inflation down, you have to raise interest rates,” Jones said. “That’s also not pleasant for the consumer because they can’t borrow or spend as much as they did previously.”

Listen to the full interview. Jones’ appearance begins at 30:20.

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