Employment and confidence gain, but high gas prices could threaten recovery

Since the start of 2012, economic data points have been moving in the right direction and seem to point to a recovery that is picking up steam. Friday’s report from the Labor Department provided more evidence to that end, with the private sector adding 233,000 jobs in the month of February and the jobless rate holding steady at 8.3%. However, increasing oil prices could halt the recent economic momentum.

The basic problem is that the U.S. economy is highly dependent on consumer spending, and there is nothing that hurts consumer spending more than high gas prices. The more consumers have to pay at the pump, the more they have to cut back on other purchases, which could drive down retail sales and ultimately stunt economic growth.

The rise in oil prices can mainly be attributed to geopolitical concerns over Iran, which could worsen or alleviate from day to day. Regardless of the the cause of high oil prices, historically the effect has been bad news for the U.S. economy.

Call Now Button