The United States is the leading economy across the globe and experienced several tribulations in the recent past following the 2008 global recession. Despite these recent challenges, there are expectations among policymakers and financial experts that the country will experience solid economic growth. Actually, financial analysts have stated that the U.S. economy will be characterized by increased consumer spending, increased investments by businesses, reduced rate of unemployment, and reduction in government cut. Some analysts have also stated that the country’s economy will strengthen in 2014 with an average of 2.7 percent or more. However, these predictions can only be understood through an analysis of the current macroeconomic situation in the United States.
The United States economy is currently not looking very good. Over the past couple of months the economy has taken a turn for the worst and we could be headed into a recession in the coming months or years. The biggest problems are in the real estate and mortgage markets. In 1999, housing prices rose at huge rates and lenders began offering riskier mortgages, which caused homeowners to keep piling up huge debts. People were taking out loans and balloon mortgage payments that they really could not afford. The problem began in late 2007, when housing prices began to fall and the system fell apart causing huge numbers of defaults on home loans and foreclosures. Currently, 5.6% of mortgages are delinquent, the highest rate in 21 years, and 2.5% of mortgages are in foreclosure, the highest rate ever (Fox 2). This has caused banks to lose huge amounts of money and as a result credit is becoming more difficult to get for consumers and businesses. With credit harder to get, consumers have cut back on their spending, which is very bad for the economy since around 72% of economic activity comes from consumers (Gross 2). Retail sales dropped .4% in December, which is disturbing because usually December is the biggest month for retailers. Other factors that show the economy is slipping are that inflation was at 4.1% in December and has steadily been rising (Fox 3). In 2007, food prices rose almost 5% and gas prices rose almost 30% from the year before. Unemployment rates also went up above 5% this month, which is the highest they have been in over 2 years (Fox 3-4). The GDP in the 4th quarter of 2007 also fell significantly from the quarter before. All of these signs and more indicate that the economy in the U.S. right now is not good ...
Every few years, countries experience an economic decline which is commonly referred to as a recession. In recent years the U.S. has been faced with overcoming the most devastating global economic hardships since the Great Depression. This period “a period of declining GDP, accompanied by lower real income and higher unemployment” has been referred to as the Great Recession (McConnell, 2012 p.G-30). This paper will cover the issues which led to the recession, discuss the strategies taken by the Government and Federal Reserve to alleviate the crisis, and look at the future outlook of the U.S. economy. By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession.
Economic Analysis of The U.S. 2001-2003
Economics have many indicators to describe how it runs. The indicators can show if the economy has improved or declined. The economic indicators that will be focused on in this analysis of the United States economy from 2001 – 2003 will be the consumer price index, the imports and exports, the unemployment rate, and finally the gross domestic product. Now while most may know the meanings of the previously stated indicators, for those who don’t, they remain useless unless defined. To begin with, these indicators will have to be defined in full to aid in understanding the analysis in more detail.
The Downward Spiral of the United States Economy
In the world to date, there seems to be an increase of world governments needing bailouts, and people of the world needing assistance from the United States. This idea has caused many Americans to come to the conclusion that if the United States closed off borders to foreign trade, it would increase it’s standard of living and make America more profitable. However, this idea is false. The United States must not close off it’s borders to foreign trade because if trade borders were to close, American manufacturing plants would begin to shut down, the American transportation system and public services would suffer resulting in American job loss.
According to the U.S. Department of Commerce, the Real GDP increases at a rate of 3.6 percent in the third quarter of 2013. Also, the Federal Reserve Economic Data (FRED) announces that the unemployment rate has reached its lowest state at 7 percent since 2009. As for the inflation rate, the U.S. government published the latest annual inflation rate, which is 1 percent. Compare these data to the 2008-2009 recessions, the GDP growth rate for 2008 is -2.7 percent and -5.4 percent for 2009. As for the unemployment rate for 2008-2009 recessions, the peak was at 10 percent. For inflation rate during the 2008-2009 recessions, the base is at -2.1 percent. In contrast with the previous recessions in 2001, the 2008-2009 recessions drop the private consumption, lowering the consumer confident. Because of this, the recovery period will take longer than the previous recessions....
The 2008 Recession
Between January 2008 and February 2010, employment fell by 8.8 million, the largest decline in American history. The 2008 Recession, which officially lasted from December 2007 to June 2009, began with the bursting of an 8 trillion dollar housing bubble. Job losses during the recession meant that family incomes dropped, poverty rose, and people all over the country were suffering. Things like this don’t just happen. Policy changes incorporated with the economy are often a major factor.
Though the goal of the expansionary monetary policy to reduce unemployment is being achieved, the rate of growth has been slow in response. The unemployment rate “dropped to 7 percent”, an achievement considering it was nearly 7.8% in September (Lee, Unemployment rate hits 5 year low). Contrary to expectations, the growth of the US economy has been described as bring “so meager that the economy, by some metrics, is still very sick” (Mankiw, In Fed Policy, the Exit Music May Be Hard to Hear). Recovery today has been slower due in part to the fact that the United States is a service economy, which is unlike economies in the past. In fact, “services have risen from 40 percent to 65 percent of output and from 48 percent to 70 percent of jobs” (Olney, More Services means Longer Recoveries). When there are essentially more services being produced in an economy, g...
The American economy has been skyrocketing during the past decade. Growth in fields such as output, price stability, consumer demand, labor markets, and productivity have been increasing at an alarming rate. This over flow of growth occurring within the country has brought a sense of safety to the American people and with increased spending based on the “wealth effect” the American economy looks to be evermore prosperous in the years to come.
With the recession officially beginning in 4Q07 according to the NBER, the U.S. aggregate chain weighted GDP fell from $13.391 trillion at the end of 2007 to $12.901 trillion as of June 2009. By some indications the recession likely conclude...