US dealing with rare bifurcation of economy

WORLD  26 April 2024 - 01:03

Business Insider carries an article about the US which is navigating a "bifurcated" economy, Caliber.Az reprints the article.

The US is navigating a "bifurcated" economy that's only been seen twice before, with both times ending in a recession, according to a top economist.

Nancy Lazar, Piper Sandler's chief global economist, told Fox Business Network on Wednesday that the current economic backdrop is "very difficult" and "very unusual," and occurred only during the energy crisis in 1978-1979 and the latest Great Recession in 2008. 

"You have those that are benefiting from higher interest rates. You have those that are suffering from higher interest rates, those that can pay for these higher prices, and those that are really getting squeezed," Lazar said.

She said large businesses have been riding high on interest income, favorable financial conditions from locking in low-cost debt, surging stock rallies, and hefty government support.

Meanwhile, consumers are feeling the squeeze, facing mounting debts at elevated interest rates while inflation eats into wage gains. 

"At the end of the day, the interest rate structure had to go higher for longer, and in turn, eventually, you did have a recession, and that's how you eventually crushed the excesses and inflation," she said. 

Lazar forecasts a 53 per cent odds of a recession, but she emphasized that we "need a recession" to tackle the inflation problem. 

"[Otherwise,] you're going to have a big group of people, a big group of companies continue to spend, continue to bid up these prices. And so I think it's a fine line, and I worry more about sticky inflation than I worry about recession."

Caliber.Az