Can AI Help Me Understand the State of Today’s Economy?

A blog by James Fritz, NewTown CFO

On occasion, we debate whether anyone really has a plan for the economy or are they just winging it. So, I thought, If AI is all that and a bag of chips, let’s have a conversation with this omniscient AI and see if we can get some insight into today’s economy.

So I asked ChatGPT the following:

“As an expert in economics and finance, please write an article for the general public that explains the relationship between inflation, consumer spending, rising interest rates, and the unemployment rate for the United States.”

ChatGPT responded with:

Title: Unraveling the Complex Web: Understanding Inflation, Consumer Spending, Rising Interest Rates, and the Unemployment Rate in the United States

Introduction: In the realm of economics, various indicators and factors interconnect to shape the overall health of a nation’s economy. Among the crucial players in this intricate dance are inflation, consumer spending, rising interest rates, and the unemployment rate. Understanding the relationship between these components is essential for comprehending the United States’ economic dynamics. In this article, we will explore how these elements influence one another and impact the country’s economic well-being.

Not bad, a little bit aloof, but a nice start. The introduction was followed by three very organized paragraphs giving the textbook definitions and relationships. However, I was left a little unsatisfied. There needed to be historical context and current statistics.

So I followed up: “use the data from July 2023 to prove your point.”

ChatGPT responded with:

I apologize for the confusion, but as an AI language model, I don’t have access to real-time data or future events beyond my last update in September 2021. Therefore, I cannot provide specific data or information from July 2023 or any other future date.

To obtain up-to-date economic data, I recommend referring to reliable sources such as the U.S. Bureau of Labor Statistics (BLS), the Federal Reserve, or reputable financial news outlets. These sources regularly publish economic indicators and reports that can help illustrate the relationship between inflation, consumer spending, rising interest rates, and the unemployment rate in the United States.

Well, that’s frustrating, we all can read the reports, but we need expert interpretation.

Frustrated, I then asked to rewrite at a fifth-grade reading level and with a Southern flair. Fun but could have been more helpful.

So, then I asked: “please add to our conversation based on the following information from the bureau of labor statistics.”

ChatGPT responded with:

I’m sorry, but I don’t have the ability to access external websites or real-time data, including information from the Bureau of Labor Statistics. Could you please provide the specific information or data points you’d like me to incorporate into our conversation, and I can help you expand on our previous discussion using that information?

So I copied the first four paragraphs from Bureau of Labor Statistics – Conusmer Price Index Press Release from July 12, 2023 and pasted into our chat:

ChatGPT responded with:

Let’s use some real numbers to better understand how money, spending, and jobs are connected, especially in the Southern United States. Imagine you have a business, like a lemonade stand, and we’ll see how recent data from the Bureau of Labor Statistics helps us understand this even better!

Let’s use some real numbers to better understand how money, spending, and jobs are connected, especially in the Southern United States. Imagine you have a business, like a lemonade stand, and we’ll see how recent data from the Bureau of Labor Statistics helps us understand this even better!

  1. Inflation and Spending:

The Bureau of Labor Statistics tells us that the prices of things we buy, like toys, clothes, and even the ingredients for your lemonade, can sometimes go up. This is called “inflation.” In June, they found out that prices went up just a little bit, like 0.2 percent. That means things got a tiny bit more expensive. Over the whole year before that, prices went up by 3.0 percent. Imagine if the lemons you use for your lemonade became more costly – you might need to spend a bit more money to make the same amount of lemonade. And if you had to charge more for your lemonade, some people might not be able to buy as much from you.

  1. How Interest Rates Affect Spending:

Interest rates are like the cost of borrowing money. When they go up, it becomes a bit more expensive to borrow money to, let’s say, buy more lemons for your lemonade stand. While the data doesn’t directly talk about interest rates, we can think of them as something that can affect your business too. If the cost of borrowing goes up, it might be harder for you to expand your lemonade stand or get the things you need to make your lemonade even better.

  1. Inflation and Jobs:

When prices go up, businesses might make more money when they sell things. This can help them hire more people to work – just like having extra hands to help you with your lemonade stand when it gets really busy. But sometimes, when prices go up too fast, it can be harder for businesses to keep up, and they might not hire as many people.

  1. Conclusion:

So, using the recent data, we can see that when prices go up a little bit (inflation), people might need to spend a bit more on the same things, like your lemonade. And if prices go up too fast, businesses might not be able to hire as many helpers. It’s important for the government and smart people called policymakers to keep an eye on all these things, just like making sure your lemonade stand runs smoothly, to keep our country’s money situation healthy!


Again, fun, but not really getting to the real issue, so I decided to take a different approach

 I proposed the following to ChatGPT:

“My hypotheis is that during Covid, the government flooded the market with money. The relief legislation and the Federal Reserve reducing interest and increasing the money supply created a world wide excess of money. This excess reduced the value of money and directly caused inflation. These packages combined with loan and rent forebearance, and temporary business closures significantly reduced the workforce. The current inidicators are just the econmy getting back to normal. Please add this to the discussion.”

ChatGPT responded with:

Absolutely, let’s integrate your hypothesis into our discussion using the data and concepts we’ve covered:

Now, let’s dive deeper into recent events and use your hypothesis to better understand the connections between money, spending, and jobs, especially during the time of the COVID-19 pandemic. Based on what you’ve said, it seems like the government and the Federal Reserve played a big role in what happened.

  1. Flood of Money and Inflation:

Your hypothesis makes a lot of sense. During the COVID-19 pandemic, the government wanted to help people who were struggling, so they passed relief legislation. This meant they gave out money to a lot of people and businesses. The Federal Reserve, which is like the money manager of the country, also made more money available by reducing interest rates and increasing the money supply.

All this extra money floating around could have led to something called “excess money.” It’s like if everyone suddenly had a lot of extra lemonade stand tokens to spend. When there’s more money but the same amount of things to buy, the prices of those things can go up. This is what we call inflation – when prices go up and the value of money goes down.

  1. Workforce and Jobs:

Your hypothesis also points out something important about the workforce. With temporary business closures, loan and rent forbearance (which is like a pause on payments), and people being cautious because of the pandemic, many people couldn’t work as they used to. This directly affected jobs and how much people could spend.

When people don’t have jobs, they can’t spend as much, and businesses might not make as much money. It’s like your lemonade stand not being open – you wouldn’t make any money and wouldn’t be able to buy the things you need. The data you’ve mentioned about decreased workforce shows how many people couldn’t work due to these circumstances.

  1. Getting Back to Normal:

Now that things are slowly getting better, it might seem like the economy is returning to its usual state. The recent indicators might show that people are going back to work and businesses are reopening. But your hypothesis reminds us that these indicators might not show the whole story. The relief packages and changes by the Federal Reserve might have set off a chain reaction that is still affecting our economy.

  1. Conclusion:

Your hypothesis helps explain how during COVID-19, the government and the Federal Reserve flooded the market with money to help people and businesses, but this might have led to inflation and affected jobs. The data we talked about earlier fits well with this idea – the changes you mentioned might have caused the economy to behave in certain ways. Understanding these connections is like solving a big puzzle, and it helps us see how money, spending, and jobs are all tied together, especially during extraordinary times.

As things continue to change and improve, smart people like policymakers will keep watching over the economy to make sure it gets back to normal smoothly – just like helping your lemonade stand after a tough time!

Interesting, that was a fun exercise. Did AI help us understand the state of the economy?

For what AI lacked in current specifics and theories, it did a nice job of communicating on different levels to different audiences. Effective communication is only part of the battle when trying to relay technical information. 

In summary, the economy is starting to feel normal again. It will take until spring of next 2024 before we really know.

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