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US Current Economic Conditions

Introduction

The economy of the United States has experienced great turmoil following the global economic crisis of 2007-2010 periods. The crisis started in the united state and it spread to the rest of the world. The US economy suffered a lot and some of its financial institutions collapsed. Although the economy is recuperating, various sectors of the economy are still lagging following the crisis. The banking system, mortgage firms, insurance companies, and the stock markets are some of the financial institutions that experienced great crises and some of them collapsed.

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The subprime mortgages and high rate of default that occurred in 2007 was the main cause of the economic crisis in the US that later spread to other countries globally. The general economic performance has been down from 2007 to around 2009 but started to record improvement in 2010 as most of the sectors have recovered.

In this paper, we shall discuss the current economic conditions in the United States. We shall look at what is happening in the economy concerning the current data for the gross domestic product (GDP), inflation, Unemployment level, trade balance among other economic indicators.

Gross Domestic Product

The GDP growth rate of the United States was negative in 2007, especially towards the last quarter. The first half of 2008 had a positive growth of 1.4% on average. The first-quarter annualized growth was 0.9% and increased to 1.9% in the second quarter. The annualized growth in real GDP for 2007 was 0.1% in the first quarter, 4.8% in the second and third quarters, and -0.2% during the last quarter.

According to Watkins (2010, p.1), the US economy has recorded a remarkable improvement in performance in 2010 compared to 2009. For instance, there has been an increase in the real GDP in the 1st quarter of 2010 compared to the last quarter of 2009. According to the bureau of economic analysis, the real GDP increased by 1% in the first quarter of 2010 and would rise by 3.2% by the fourth quarter if the trend continues.

This would beat 2009 growth that was 1.36% in the fourth quarter. With this improvement, the economy is strengthening and businesses are coming up. Since 2005, businesses were recording a decline in growth as most of them were not replacing whole inventory after the sale. The rate of disinvestment was increasing and was $139.2 billion as of the third quarter of 2005. The increase in disinvestment continued up to the last quarter of 2009 and begun to change in 2010 when investment in inventory increased by 31.1 billion dollars within the first quarter. The real GDP increased by $105.2 billion in the first quarter of 2010 compared to the last quarter of 2009.

Unemployment situation

According to the US Bureau of labor statistics (2010, 1), the rate of unemployment increased in April 2008 to 8.9% which was about a 3.9% increase from the previous year. This increase marked the highest rate of unemployment in about 25 years. The rate of unemployment increased in the first 7 months of 2008 and was 5.7% by July 2008. There was also a payroll decrease of 0.5 million between 2007 and 2008. The employment rate went down by the end of 2007 despite the increase in output around the end of the first half of 2008. It was controversial to have employment decline as output increases.

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This situation was ascribable to the rise in labor productivity in 2008. With the increase in labor productivity, the employment level declined because a few employees were needed to hit the industry production target. Industries therefore could not hire more employees as it was not economically viable. The rate of unemployment in the US was about 9.4% in 2009 following the 2008 to 2009 economic recession. This rate excluded the part-time workers and those dissatisfied with their current positions and are looking for permanent jobs. If all there are taken into account, the rate of employment would have hit 15.9%.

By January 2010, over 6 million workers were looking for permanent employment. According to the US Bureau of labor statistics (2010, 1), the unemployment rate as of April 2010 was 9.9% which was an increase from 9.7% between January and March 2010. The number of long-term unemployed persons has been increasing and was 6.7 million by April 2010 representing 45.9% of the total unemployed persons. The number of part-time workers increased to 8.8 million part-time workers who are looking for permanent jobs by February 2010. The unemployment rate for white Americans was 8.6% which was 6.3% lower than that of African-Americans.

Inflation

The rate of inflation determined by the consumer price index (CPI) increased to 5.6% between 2007 and the second quarter of 2008. During the second quarter of 2008, the annualized rate of inflation as indicated by CPI was 10.6%. The GDP price index was 2.6 during the first quarter of 2008 which showed a favorable figure from the CPI. The GDP price index rate decreased further to1.1% in the second quarter of 2008 indicating that the economy was strengthening. According to the financial forecast center (2010, 1), the rate of inflation as of 7th May 2010 was 2.39% and the overall annual economic growth for the United States was 3.20%. This indicates a remarkable improvement from 2008.

United States international trade

The US is the biggest trading nation in the world with the biggest export market. The US currency circulates all over the world because it is the most used currency in trade. The US dollar is the internationally accepted unit of currency for precious commodities like gold (Watkins, 2020, 1). The current trend indicates that the world market might be forced to move away from the US dollar and use other currencies like the Japanese Yen or the China Yuan.

This is because the US is in huge debts with these large economies which have huge dollar reserves. About 1.6 trillion US dollars worth of US securities are held by China. The US treasury bonds are sold to close this deficit both to local and international buyers.

The US current account was in deficit of 695.9 billion US dollars in 2008 which is the amount by which imports exceeded exports. Over half of this deficit was in the trade of petroleum products and a big portion of the remainder was held with china. In 2008, the US had a surplus in service trade but a deficit of 821.2 billion US dollars on other commodities. According to global economic research (2010, 1), the US current account deficit was about $39.7by the second month of 2010.

Conclusion

The current economic conditions of the United States indicate that the economy is recovering from the 2008 economic crisis. The major indicators of economic growth like inflation rate, level of employment, and GDP indicates great improvement from the economic crisis.

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The biggest challenge with the US is the means of financing the budget deficit that would not keep the economy in debt. Financing deficit through borrowing puts the economy into debts which might continue increasing in the future if the country continues to experience a budget deficit. The rate of unemployment will only reduce when the companies recover from the recession and start hiring more employees. A high rate of unemployment is not healthy for an economy because it increases the dependency ratio in the economy.

This is because the unemployed will rely on the few employed for their daily needs. It is also a dangerous situation in that it can increase the rates of crime in the country. A high rate of inflation weakens the currency of a country compared to the other currencies in the world. A weak currency has both advantages and disadvantages to the country. China and other large economies are becoming threats to the US economy. they are growing at a higher rate than the US.

Reference List

Global Economic Research. (2010). United States balance of tradeNew York: Bloomberg. Web.

The Financial Forecast Center. (2010). US unemployment rate forecast. Washington, DC: FFC. Web.

United States Bureau of Labor Statistics. (2010). Economic news release: employment Situation summary. NE Washington, DC: US Government. Web.

Watkins, T. (2010). Applet-magic.com. department of economics: a Statistical review of current economic conditions in the US. Silicon Valley $ Tornado Alley. San José state university. Web.

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StudyCorgi. (2021, December 22). US Current Economic Conditions. Retrieved from https://studycorgi.com/us-current-economic-conditions/

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"US Current Economic Conditions." StudyCorgi, 22 Dec. 2021, studycorgi.com/us-current-economic-conditions/.

1. StudyCorgi. "US Current Economic Conditions." December 22, 2021. https://studycorgi.com/us-current-economic-conditions/.


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StudyCorgi. "US Current Economic Conditions." December 22, 2021. https://studycorgi.com/us-current-economic-conditions/.

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StudyCorgi. 2021. "US Current Economic Conditions." December 22, 2021. https://studycorgi.com/us-current-economic-conditions/.

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StudyCorgi. (2021) 'US Current Economic Conditions'. 22 December.

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