Mike Zaffaroni, the owner of Liberty Landscape Supply in north-east Florida, faced his toughest year yet in 2022, as he battled soaring costs, supply chain bottlenecks, and a severe worker shortage. Despite these challenges, Zaffaroni’s business saw a 16% rise in revenue over the previous year, and recently opened a new location. Florida’s economy has seen a surge in business applications and new residents thanks to its balmy weather and lack of income tax. This has helped keep the state’s unemployment rate at 2.6%, below the national average. However, with the US central bank tightening monetary policy and regional lenders retreating, there are concerns that cracks may be forming in the economy.
Zaffaroni warns that rising costs of capital could impact his business’s ability to invest in infrastructure, equipment, inventory, and personnel, causing slow growth. As the Fed navigates how to moderate inflation and avoid a recession, the RV capital of the world, Elkhart, Indiana, offers crucial insights, since RV sales tend to be a barometer for the economy’s health. Although employment in this area has dropped, Covid-19 distortions have muddied the signals. The labor market has seen significant growth amid waves of layoffs across various industries. Despite rising unemployment in some states, consumers continue to spend thanks to stockpiles of savings. However, policymakers are concerned that rapidly rising pay might pressure companies to raise prices, causing more inflation. Some sectors, such as the housing market, have already begun stabilizing. For now, the Fed is considering a more patient approach to see how the economy evolves before applying additional tightening measures.
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