THE MACROECONOMIC CALENDAR Each month government agencies like the Departments of Labor and Commerce, and private institutions publish a variety reports addressing leading, lagging, and coincident indicators. 1. Lagging indicators, like the unemployment rate and corporate profits, are of little help in forecasting since they change only after the economy begins to shift. 2. Coincident indicators, like personal income and industrial production that move simultaneously with the business cycle are equally unhelpful in forecasting the future. 3. Leading indicators that move in advance of changes in the business cycle are more helpful. Housing starts usually start to increase several months before the emergence of full recovery, and tail off several months before a recession begins. Once again a broad index comes to the rescue. As a manager, you should maintain a close watch on the Conference Board’s Composition Index of Leading Economic Indicators. The index charts the movements of 10 individual leading indicators. Included in this list is the index of consumer expectations, new orders for capital goods, and changes in the money supply. These are chosen because they relate directly or indirectly to changes in fiscal and monetary policy as well as components of the GDP equation. When the Composition Index has trended down 3 to 5 consecutive months, it generally signals a coming recession. A similar sustained upturn of the Index generally indicates economic recovery and expansion. THE YIELD CURVE The yield curve measures the spread between short and long-term interest rates. This curve can take on one of three shapes: normal, inverted, or steep. The normal yield curve typically occurs when investors in bonds expect the economy to expan... ... middle of paper ... ...perceived trough of the business cycle in order to complete your new production or retailing facilities in time for the recovery. Mergers, Acquisitions, and Divestitures While you may have adopted a strategy of expansion through mergers, acquisitions, or policies favoring divestiture of unprofitable or uncomplimentary divisions, macroeconomic considerations can help you decide when to execute your strategy. Stock prices are typically at their highest toward the peak of economic expansion, during the late cycle bull market; and begin falling during the bearish phase of the market cycle that anticipates the downturn. If you have the liquidity, or can borrow the cash, you may want to pursue a countercyclical strategy, waiting for stock prices to plummet during the recession, and selling your "dogs" at a premium as prices move through the bull market toward the peak.
ii. The economy is said to be experiencing recession when demands for certain products and services shrink. When demand falls, the prices will also decrease. When this happens, companies will not be able to make a lot of profit. To survive in the industry, they needed to cut some of their staffs. During this period of time, the rate of unemployment is rising. When they do not have enough workers, the productions are not as numerous as during the ‘booming’ state. Because of the...
In conclusion, the current macroeconomic situation in the United States is characterized by moderate growth because of better economic conditions that were brought by the events of 2013. The country has experienced moderate economic growth since the 2008 global recession but has shown real signs of momentum. While the country is not concerned about recession or inflation, the rate of unemployment is still a major challenge despite improved consumer and business confidence. As a result, the Federal Open Market Committee or Federal Reserve System needs to adopt fiscal and monetary policy initiatives that help address the unemployment issue and promote high economic growth.
The U.S. economy is always changing, in both positive and negative ways. However, there are methods of controlling it in order to make for a more steady and positive growth. This paper is focused on five major categories of the economy during the period of 2000-2001. These would include: monthly unemployment, Quarterly GDP, CPI, Discount Rate, and M2 money supply. The information will explain how each category looked like at the time, and what certain policies were put into affect while explaining what those policies mean.
"How the Government Measures Unemployment." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, n.d. Web. 04 July 2017.
I would say there is a disconnect between the stock prices and the U.S economy because the unemployment rate is high, interest rates are low and many areas of the economy are still recovering while the stock market continues to new highs.
The economy’s predictions of course, are not always right. But these leading and lagging indicators are here to help you decide what you believe. Is the economy getting worse and are we headed towards another recession? Is the economy getting any better, even better then ever? At the moment, this very economy is known to be in a recession, though some people say we are no longer in one. So, is the economy in a recession? Use this information so you can form an opinion but just remember before you decide, it’s always up to the government and the people part of the economy to decide where we are heading. It’s our spending and our choices that put us where we are now.
It has been 5 years now, but the world economy is still hovering over with ill effects of global economic recession. Different economist define recession in a different way but one common definition which can be derived is that recession is long lasting and prime reason for slowdown to economic activity(GDP). In terms of measuring the effects of recession, the broadest indicator of economic activity is real gross domestic product(GDP). Our following section will discuss how the economic activities in US has actually decreased since the beginning of market turmoil.
Global recessions of 1975, 1982, 1991 and 2009 have questioned economists of the specific era to provide the causes of these recessions along with steps to avoid them. IMF considers global recession as “A decline in annual per capita real World GDP (purchasing power parity weighted), backed up by a decline or worsening for one or more of the seven other global macroeconomic indicators: Industrial production, trade, capital flows, oil consumption, unemployment rate, per capita investment, and per capita consumption” (World Economic and Financial Surveys). A recession therefore affects all the countries dependent on an economy undergoing recession. Since decades economists are trying to draft possible measures that an economy can take to avoid recession or to get out of a recession. Constant debates, on which approach an economy should take to get out of recession, have never reached to any conclusion. Mainly there are three schools of thought in economics that emerged during and after recession i.e. classical, monetarist and Keynesian. No school of thought has yet provided a perfect solution as the approaches by these three schools have many pros and cons. However, many economists believe that Keynesian is a more suitable approach for getting an economy out of recession. Although Keynesian approach have policy lags and can cause high inflation, however, Keynesian tools’ expansionary fiscal policy, expansionary monetary policy and revaluation of currency are very effective in increasing GDP ultimately pulling an economy out of recession.
In conclusion, regardless of Macropoland’s current economic condition, it is fair to say that it is all part of the business cycle. The business cycle has three parts: peak, trough, and peak. The peak is the date that the recession starts. In Macropoland’s case, the peak would be at the beginning of 1973, its trough somewhere between 1973 and 1974, and then its peak again at 1974. In the second scenario, Macropoland is either at its trough, where it is about to head up again because of its low inflation rate, or it is at its expansion, on its way to heading to its next peak.
According to The Balance, a financial website brand owned by About.com, the causes of the 2008 recession have been blamed on certain factors such as the decline of manufacturing orders that began in 2006, and the housing market crash in 2007 which created a domino effect that lead to recession. According to Investopedia, in the short time before the 2008 recession, stocks were at an all time high in October of 2007. Less than a year later in September of 2008, stocks were down over 20%. This is eerily similar to today’s massive growth in the economy which could eventually fall like 2008’s. One of the largest indicators of where the economy is heading stems from the current politics of the United States. Economic plans of the Trump Administration such as an investment in infrastructure, promises to lower taxes, and bringing jobs and production back to America, have arguably been some of the reasons for such a large amount of speculative growth in the economy. Unless Washington does in fact follow through on their end of the bargain, the growth that our economy is seeing today can turn in the opposite direction in the blink of an eye. Some signs of a future recession of the economy have come just recently from the unexpected unemployment increase. According to CNBC, in March of 2017, 98,000 jobs were created although it was estimated that 180,000 were
United States Department of Labor. The Employment Situation. Bureau of Labor Statistics. (February 1, 2015.) http://www.bls.gov/news.release/pdf/empsit.pdf (September 6, 2015)
This paper will be a discussion of the current economic condition of the United States and this writer’s opinion on how it can be changed. Unemployment is high and needs to be reduced to full employment. We will explore the inflation rate, GDP growth and other factors of our current economic situation.
The GDP is the total aggregate income of the United States. It is comprised of consumption, investment, government spending, and net exports. The GDP in the fourth quarter of 2000 grew at a 1.1% annual rate, the lowest since a 0.8% increase in the second quarter of 1995. The below par performance in GDP is due to those factors that comprise the GDP. The most important of which is consumption. Consumption in the United States has been less than expected mainly due to low consumer confidence. Consumer confidence has hit a 10 year low with an index of 106.8 as reported by Alan Greenspan. In the past 2 months the index number has plummeted nearly 22 points, the biggest decrease since the 1990-1991 recession. The reason for this recent drop in consumer confidence is due to several key factors. One factor is the poor performance of the stock market. The Dow Jones is down from its peak that was hit last year, but has now rebounded slightly. The Nasdaq took a dive with the decrease in the prices of tech stocks. The Nasdaq has fallen nearly 56% from its peak in March of 2000. The Wilshire 5000, which is a broader market, is also down by about 22%. Also a factor in dropping consumer confidence is the fear of more layoffs by major employers. The media has paid a lot of attention to large layoffs of companies, yet the labor markets still remain fairly tight. The natural rate of unemployment in the US is approximately 5%, which is higher than the actual rate...
In summation, based on these three but important economic variables one can expect slight improvements for the economy in different aspects. The best news appear to be an expected rise in projected consumer spending, while a steady unemployment rate is expected, and small but substantial growth in GDP seems to be around the corner thanks to an encouraging PMI that reports expansion at a lower rate.
Many countries in the world have been suffering a recession in their economies and UK has not been an exception. A recession is a macroeconomic term describing one of the two business cycles that economies go through. The business cycles is characterized by either a boom where there are more business activities carried with a rapid economic growth and points of recession where there is retardation min economic growth. Various aspects and factors contribute to economic growth, which is measured through GDP. This factor may include savings, investments government spending plus other factors within either an increase or a decrease. Reduction in spending may lead to a recession while a n increase in spending may lead to expansion that is a boom in the economy.