The essay paper has been developed to analyse the economic outlook of the United States of America. According to the market experts, the stable growth outlook between 2 to 3 percent in 2017 has validated the healthy economic condition of the developed nations. The overview of the US outlook has been modest, to say the least as President Donald Trump has promised to boost the economic growth rate to four percent. Notably, the rate of unemployment will be compromised following the monetary policy and fiscal policy.
On the other hand, the rate of inflation will be stabilised close to 2 percent supporting the spending of the consumers (Amadeo, 2017). Decisively, the stronger domestic demand from the consumers and efficient policy-making by the Central Bank of America has boosted the growth rate of the developed nation. Precisely, the price decline of crude oil and coal in the recent years has encouraged the economy to make substantial industrial growth.
The US economic output has been considered to be on the right trajectory as the US Gross Domestic Product, and GDP per capita are continuously growing since 2010 to 2015. As per the statistics of the World Bank, the US Real GDP was recorded worth US$ 18036.65 billion in 2015 valuing the 29.09 percent of the entire world’s GDP (“United States | Data”, 2017). A graph figure has been presented to analyse the GDP trend of the economy in the past decade.
The existing GDP trend of the US economy has depicted a significant trend of the economy supporting the decision-making of the US Federal Reserve Bank and the monetary policy. Moreover, the data released by the US Bureau of Economic Analysis, US economy has recorded growth of 1.9 percent during the fourth quarter of 2016. Convincingly, the yearly GDP of the economy is majorly boosted by consumer spending and industrial production.
The figure presented above has clarified the inconsistent growth rate scenario of the US economy. However, in the previous three years of so, the average growth rate of the economy was 2 to 2.5 percent. On the other hand, the US GDP per capita was measured at US$51638.1 during 2015 (“U.S. Bureau of Economic Analysis”, 2017). The trend of the US GDP per capita is on an upsurge as in the previous 7 years the GDP per capita was increased in a staggered pattern improving the economic position of the US citizens.
The forecast of US economy in 2017 is promising to say the least. Recently selected President of the USA, Donald Trump has promised to reduce the tax burdens and specific economic regulatory to support the growth of the economy. In addition, the external factors supporting the US economy will certainly play a major part to drive the economic progress. Meanwhile, the role of Federal Reserve Bank, the Central Bank of America will be crucial to sustain the growth factors in the longer run (Office, 2009). The tight monetary policy of US Federal Reserve Bank has maintained a significant flow of money so that infrastructural and industrial development has been made in the US supporting growth (Heinberg, 2011).
Invariably, the government of the US is planning to reduce the regulatory costs of the states so that unproductive government spending can be limited. Moreover, the expenditure has been increased in the public and private sector to renovate the infrastructure of many industries. Precisely, increase in domestic demand and consumer’s expenditure has been a positive sign for economic sustainability (Chafuen, 2017). The US government has introduced strategic policies in the crude production and mining industry to tackle the decline in prices in crude and coal. Moreover, significant measures have been taken by the government to increase the productivity of tourism, services and manufacturing industry so that the particular sectors can contribute towards economic growth.
The current labour market analysis of the United States shows that the unemployment rate in the market has effectively control in the last five years. The economic reforms introduced by the federal government have been a primary factor for controlling the increasing unemployment rate after the great global recession (Moffitt, 2014). On the other hand, the development of IT businesses, healthcare services and manufacturing industry has supported the growth of employment level in the country. Furthermore, the development of economic balance has provided adequate job openings to meet the growing needs of the populations (Moffitt, 2014). The US government has been quite successful in controlling the down turning conditions of the labour market after the Global Financial Crisis in the year 2008 and 2009. The last ten years employment rate of the United States has been presented in the figure given below:
It can be seen from the above figure that the unemployment rate in the country has increased to around 10 percent suddenly after the Global Financial Crisis due to the downturn of the financial market of the United States. The downturn of the financial institutions directly impacted the financial positions of the other major industries leading to a period of recession and loss of millions of job (Lange & Georgellis, 2007). Hence, a cyclical unemployment can be evident in the United States during and after the great depression period. The financial downfall in the market reduced the demand for the labours that resulted in increase in the unemployment level.
Later on the US government took necessary economic measures in the form of its fiscal and monetary policy to promote business in the country. For example, the bank interest rates for fixed deposits have been decreased to influence people to invest money in the market (Chafuen, 2017). Hence, a great success can be evident for the economic policies implemented by the government that brought down the unemployment level to 4.9 percent in the year 2016.
On the other hand, structural unemployment can be evident in the United States due to the gap of skills among the young generation people and the skills required by the major organisations. Therefore, the structural unemployment can be recognised as a significant factor for the increase in the unemployment rate in the US labour market (Card, Kluve, & Weber, 2010). It is important to note that irrespective of the successful policy of the US government, there is a certain level of unemployment in the nation that cannot be mitigated. The primary reason for the minimum level of unemployment is the frictional unemployment that occurs due to the voluntary retirement of the people from one job to get into a new job. The falling rate of minimum wage can also be recognised as a factor leading to frictional unemployment in the United States (Lange & Georgellis, 2007).
Currently, the US government has taken different initiated to minimise the unemployment rate in the country. Firstly, the government has introduced an increment in the minimum wage rate policy to maintain a balance in the labour market (Card, Kluve, & Weber, 2010). Additionally, the US government has introduced budgetary package to provide skills development trainings to the young generation people. But, it is important to keep in mind that a closed economy cannot has a zero rate of unemployment due to the unavoidable occurrence of frictional unemployment.
By considering the current market situation of the United States of America, the federal government has been quite effective in controlling the price level in the nation. But, a stiff fall in the aggregate price level can be evident by the end of the year 2009 due to the after effects of the Global Financial Crisis. Not only the United States of America, but also several other developed economies were shattered during this financial crisis. The financial crisis made several large organizations face huge amount of losses and lead to increase in the unemployment rate (Gerberding, Gerke, & Hammermann, 2012).
Hence, the supply of money in the market decreased and value of the products started increasing resulting in an inflation rate of above 5 percent by the end of 2008. But, the economy of the United States fell into a deflation immediately after the Global Financial Crisis due to fall in the aggregate demand and high amount of aggregate supply in the market (Amadeo, 2017). But, later on the US government has worked effectively to control the aggregate price level and maintain a nominal inflation rate in the nation.
There are two types of inflation that occurs in a closed economy. One is known as demand pull inflation and the other is known as cost push inflation (Gerberding, Gerke, & Hammermann, 2012). The two types of inflation are presented herein below to understand the causes of inflation and deflation in the US economy.
Firstly, demand pull inflation can be evident during the year 2008 due to high availability of liquid cash among the people. The available of money increases the purchasing power that has lead to demand pull inflation in the nation.
It can be seen from the above diagram that rise in the aggregate demand leads to shift in the aggregate demand curve from AD1 to AD2 resulting in rise in the price from P1 to P2 (Giannessi & Maugeri, 2005). The opposite impact occurred after the global financial crisis, when the availability of money in the market reduced due to the loss of jobs and financial losses resulting in a deflation.
On the other hand, the cost push inflation occurred when the aggregate price level increased due to a lower level of supply in the market during the Global Financial Crisis. But, immediately after the GFC, a deflation can be evident in the market due to a high rate of increase in the aggregate supply in the market.
Currently, the government of the United States have been quite capable of controlling the aggregate price level in the market. The United States has an inflation rate of around 2.5 percent which is normal for a developed economy (“U.S. Bureau of Labor Statistics”, 2017). The primary reason for the successful control over the inflation rate is the price flooring policy, fiscal policy and low credit rate in the nation (Mie?inskien? & Lapinskait?, 2014). The US government is using a low credit rate to promote businesses resulting in high demand in the market that further results in growth of inflation rate. Furthermore, the US government has used a price flooring policy and minimum wage policy to control the supply of money in the hand of the consumers. Hence, it can be seen through the above analysis, that the US government has been quite effective in controlling the aggregate price level in the domestic market.
Conclusion
The leading economic indicators of the US economy have voted for substantial prospects for growth. The overall outlook of the GDP growth rate of 2 to 3 percent has pointed towards continuous progress for the US economy. Precisely, the discussion of the GDP data, unemployment status, inflation scenario, and government policy measures have signalled in favour of a significant economic forecast. Most importantly, the Central Bank of America has identified effective measures to fuel monetary flow in the economy. Alternatively, the policy of the government has reduced unproductive government expenditure leading to economic sustainability in the future. The suitable economic policies have targeted to produce more jobs in the private and public sector so that the economic status of the individual will be improved.
References
Amadeo, K. (2017). Experts Forecast Weak But Steady Growth. The Balance. Retrieved March 2017, from https://www.thebalance.com/us-economic-outlook-3305669
Card, D., Kluve, J., & Weber, A. (2010). Active Labour Market Policy Evaluations: A Meta-Analysis. The Economic Journal, 120(548), F452-F477. https://dx.doi.org/10.1111/j.1468-0297.2010.02387.x
Chafuen, A. (2017). The U.S. Economy In 2017: Welcome Higher Growth. Forbes.com. Retrieved March 2017, from https://www.forbes.com/sites/alejandrochafuen/2017/01/03/the-u-s-economy-in-2017-welcome-higher-growth/#5354a64b38fb
Gerberding, C., Gerke, R., & Hammermann, F. (2012). Price-level targeting when there is price-level drift. Journal Of Macroeconomics, 34(3), 757-768. https://dx.doi.org/10.1016/j.jmacro.2012.05.006
Giannessi, F. & Maugeri, A. (2005). Variational analysis and applications (1st ed.). New York: Springer.
Heinberg, R. (2011). The end of growth (1st ed.). Gabriola Island, B.C.: New Society Publishers.
Korres, G. (2007). Regionalisation, growth, and economic integration (1st ed.). New York: Physica-Verlag.
Lange, T. & Georgellis, Y. (2007). Active labour market policies and unemployment (1st ed.). Bradford, England: Emerald Group Pub.
Mie?inskien?, A. & Lapinskait?, I. (2014). The Research on the Impact of the Changes of Commodity Price Level in the World Commodity Exchanges on Variation of General Price Level. ECONOMICS & SOCIOLOGY, 7(4), 71-88. https://dx.doi.org/10.14254/2071-789x.2014/7-4/5
Moffitt, R. (2014). Unemployment benefits and unemployment. IZA World Of Labor. https://dx.doi.org/10.15185/izawol.13
Office, I. (2009). Key Indicators of the Labour Market (KILM) (1st ed.). Geneva: International Labour Office.
U.S. Bureau of Economic Analysis. (2017). Bea.gov. Retrieved March 2017, from https://www.bea.gov/
U.S. Bureau of Labor Statistics. (2017). Bls.gov. Retrieved March 2017, from https://www.bls.gov/
United States | Data. (2017). Data.worldbank.org. Retrieved March 2017, from https://data.worldbank.org/country/united-states
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