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Financial expert Daniel Roccato argued that consumers can’t keep up amid what he called a “recession of pay cuts.”
Roccato made the argument on “Fox & Friends Weekend” Sunday, three days after it was revealed that the The US economy contracted in the spring for the second quarter in a row, meeting the criteria for a recession as record inflation and higher interest rates forced consumers and businesses to cut spending.
Gross domestic product, the broadest measure of goods and services produced across the economy, shrank 0.9% on an annualized basis in the three-month period from April to June, the Department of Trade in your first reading of the data. Economists at Refinitiv had expected the report to show the economy expanded 0.5%.
Recessions are usually referred to to two consecutive quarters of negative economic growth and Thursday’s GDP report revealed consecutive declines in growth, bringing the economy to the technical criteria of one.
WHY IS INFLATION SO HIGH AND WHEN DOES IT START TO COOL?
Economic output already fell in the first three months of the year, with GDP falling 1.6%, the worst showing since spring 2020, when the economy was still deep in recession induced by COVID.
Inflation reached a record level of 9.1% in June.
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Roccato, a clinical professor of finance at the University of San Diego’s Knauss School of Business, argued that most Americans are “feeling the pinch” of high inflation, and recent polls support that sentiment.
A new Suffolk University/USA TODAY national survey found that more than 58 percent of respondents said they eat out less, 48 percent drive less, and 45 percent said they cut back on grocery spending and postpone or cancel the holidays due to inflationary pressures. .
The national survey of 1,000 voters was conducted from July 22 to 25.
The Department of Labor revealed this earlier this month inflation accelerated more than expected to a new four-decade high in June as the price of everyday necessities remains painfully high.
The department said the consumer price index, a broad measure of the price of everyday goods including gas, groceries and rent, rose 9.1 percent in June from a year ago. Prices rose 1.3% in the one-month period from May. Those numbers were much higher than the overall figure of 8.8% and the 1% monthly gain expected by Refinitiv economists.
The data marked the faster rate of inflation since December 1981.
Generalized price increases: Energy prices increased by 7.5% in June compared to the previous month, and they increased by 41.6% compared to last year. Gasoline, on average, costs 59.9% more than a year ago and 11.2% more than in May. The food index, meanwhile, rose 1% in June as consumers paid more for items such as cereals, chicken, milk and fresh vegetables.
Roccato noted on Sunday that while the data shows wages have risen, they haven’t risen enough to keep up with rising inflation.
He stressed that people have jobs, but “at the moment we’re just not keeping up.”
It was revealed earlier this month that the US labor market remained solid in June as hiring came in ahead of expectations.
US employers it added 372,000 jobs for the month, compared to 390,000 the previous month, indicating that inflation has had a limited impact on hiring so far. The unemployment rate remained stable at 3.6% for the third consecutive month.
Average earnings rose 5.1% year-over-year in June, compared with 5.2% in May. Even so, growth lags behind consumer inflation, which stands at 9.1%.
Employment data for July will be released on Friday.
On Sunday, Roccato offered advice on how consumers can stay afloat amid the economic landscape, encouraging Americans to “boost that rainy day fund if you can.”
He also recommended locking down a new job now because if the job market starts to crater, one wants to make sure they’re in good shape from a job standpoint.
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People at Roccato invest in themselves through education and learning new skills, especially if the job market tightens.
Megan Henney of FOX Business contributed to this report.
Talia Kaplan is a reporter for FoxNews.com. Follow her on Twitter @taliakaplan
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