February 24th, 2011 13:46 EST
How Will the Crisis in the Middle East Affect the US Economic Recovery?
With the economy finally picking up a little steam like a freight train that begins to move slowly and is now in a steady motion moving forward, the economy has improved from two years ago when all we saw on the news how many jobs were lost that day and how many tent cities (homeless) people there were sprouting up all over the country and in places there had never been homeless people before to a stream of more positive news on the economic turnaround and the progress we have made since those dark days.
The American people are turning around their gloom moods they have had for a couple of years and are now feeling a little optimism with companies starting to hire more and more everyday. We still have a lot of work to do and a long way to get back to the GDP (Gross Domestic Product) in the United States being the number one exported item but we have been inching closer and closer lately to that becoming a reality.
Now, like in life things can be going so well and then suddenly here comes one of life`s curve balls that has such a break and velocity on it like Nolan Ryan throwing a three ball one strike pitch the breaking ball rolls in like a comet to the plate. That curve ball as we all know is the crisis in theMiddle East and the comet heading to the plate is the now hot topic which is the oil crises and rising prices per barrel of crude oil.
There are a lot of opinions on whether or not the rising oil prices are going to affect the U.S. Economy and how bad will they affect the economy? In my opinion, yes it will affect our economy or at least slow it down for a little while and here`s why.
First of all, we all see the rising gas prices at the pump in route to record numbers. I think a lot of us will have to get second jobs just to be able to drive our cars. This is all in part to the crises in the Middle East. What happens is with the rising fuel costs on the logistical side trucking companies have to pay more for fuel to truck in items to stores, companies, etc. This is the Logistical Supply Chain side of business. Trucking items in account for over ninety-percent of how most companies receive their goods and ship their goods. The trucking companies have to make a profit on their shipments so they raise the cost of shipments to account for their rising cost of fuel.
Most shipments like LTL (Less than Truckload) charge on cost of fuel not distance and (TL ) Truckload shipments charge on mileage but the mileage factor is added into the cost of the fuel from that trucking lane to destination so there is an overall profit and a higher profit margin for those types of shipments which with the higher cost of fuel comes the higher cost for that shipment.
Since companies are paying more for delivering of merchandise from the other side of the supply chain element, the companies have to raise prices on certain items to account for the higher cost of that delivery. They have to make a profit also and have to make a certain profit margin on those items so this means the costs go way up.
Go into Wal-Mart and look in the dairy section. Milk at least here in Alabama was around four dollars a gallon which is up by over two dollars from a couple of weeks ago. Check out the beef prices, they have sky rocketed also. Not to mention lots of other items and we are talking Wal-Mart which is normally lower in cost on everything than say a normal grocery store like Publix or Winn Dixie two major retailers in the South. This is also just for food and grocery items. The fuel costs will affect everything else as-well other than food and groceries.
Also, lately the Stock Market has been closing at lows not gains as we saw a month or so ago before the crises started. No one including companies are buying or selling stock. They are watching and waiting for the outcome of the Middle East crises.
The effect of all of this is companies are now in a holding pattern on hiring. Over the last year on major job search engines like indeed.com, at least in my skill set; I was surprised to see how many jobs were steadily popping in daily. Now, it has basically stopped having jobs flow in like water.
This means the already millions of people still unemployed and looking for jobs will have to continue being unemployed. They are not spending money or spending money they don`t have because of not working which means they will not be buying anything or spending a lot of money so the retail sector of the economy is slowing once again and probably will hit another stand still depending on how long the Middle East crises lasts and how long it will take for businesses and consumer confidence to be restored which when that eventually happens those companiess will start to hire once again and people will start to find jobs and be able to buy things. At that time, the retail sector will increase. The retail sector drives or slows our economy which means it basically controls the economy.
So, before you decide to take that long trip across the country, either wait for a while until the gas prices go down to affordable numbers or become a quick Iron Man Triathlete and ride a bike instead because it may be a while before fuels cost become a little more affordable once again.