(AmericanProsperity.com) – As America’s economy remained shut down in April due to non-essential business closures and stay-at-home orders, grocery prices broke records and energy took a beating. The US Bureau of Labor Statistics (BLS) reported grocery prices skyrocketed 2.6% in April, making it the largest one-month increase since February 1974. At the same time, energy prices plummeted as oil and gas dropped to record lows. Also, unemployment is breaking new records, resulting in worrisome economic trends.
Last week, the BLS reported the economy lost over 20 million jobs in April, and the unemployment rate shot up to 14.7%. That’s the worst since the Great Depression. However, incorrect classification of individuals as either employed, unemployed, or not in the labor force may mean the real unemployment rate is 20%. Betsey Stevenson, former Member of the President’s Council of Economics and Chief Economist at the Labor Department said there’s a reason for the errors:
Interviewers were told to classify people who were employed by absent from work due to COVID-related reasons as temporarily unemployed. Many did this incorrectly–correcting for this error raises the unemployment rate to nearly 20%. (The BLS doesn't do "ad hoc" corrections)
— Betsey Stevenson (@BetseyStevenson) May 8, 2020
Additionally, the Wall Street Journal reports the economy is contracting much faster and deeper than expected. The sharp drop will only recover gradually and could take as much as 10 years to fully recover what has been lost. Most economists surveyed said the Gross Domestic Product (GDP) would decline 32% in the second quarter; that’s down from 25% expected in April.
Food Prices Soar
In April, more people staying at home created more demand for food-related services. Overall, the “food at home” index (i.e., food purchased at grocery stores) rose 4.1% over the last 12 months. At the same time, meat processing plants closed due to workers contracting COVID-19, limiting the supply of meat. As a result, meat, poultry, and fish prices increased by 16.1%. Since early March, egg prices have nearly tripled due to shortages and demand.
As meat supplies dwindle, grocery stores have put a limit on meat purchases and increased prices. Over the last several weeks, allegations have surfaced that the eight companies that control the meat supply are colluding with one another to reduce supply and increase prices. Eleven State Attorney Generals have asked the Department of Justice to investigate if there is price-fixing.
Energy Demand Evaporates
As Americans travel less by car, plane, and rail, prices collapsed in April. Overall, the energy index dropped 20.6%. That’s the largest one month decrease since November 2008. Gasoline fell 20.6% for April and 32.5% since December 2019. Over the last 12 months, the energy index dropped 17.7%. It’s the largest 12-month drop since September 2015. Gasoline dropped 32%, and fuel oil that heats homes and businesses dropped 33.2% over the last year.
100% Probability for Recession
As states begin slowly opening their economies, economists are almost 100% certain the US economy will be in recession within the next twelve months. Some say the US is already in a recession and could even be facing depression. It’s entirely possible that the damage done to the economy may not be reversed.
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