Wednesday, November 16, 2011

A Slow And Maybe Not So Steady Recovery

America’s economy has been in a slump for four years, and only recently has it started improving. However, the Bureau of Labor Statistics reports that the number of jobs is increasing at a precariously slow and almost nonexistent rate, meaning that our economy could dive back into a recession at any point.

However, the statistics are not all so morbid. The number of jobs is indeed increasing, as observed in the 80,000 job increase for October, a significant rise from earlier this summer. Overall, the unemployment rate dropped to 9% in October. America owes these increasing rates to private payroll growth. The private sector is responsible for adding 2.8 million workers since the beginning of the slump in 2008. Despite the positive direction in which these numbers are headed, one must also take note that these increases are alarmingly slow. A rise in the number of jobs and the employment levels is a good thing, but how good is it if it is barely enough to keep up with the population growth?

Americans are torn over how to further stimulate the economy so the employment and job rates increase faster. I would believe that, as the results of private payroll growth show, increasing the private sector would be a reliable option. However, this would bring into question the tradeoff between economic stimulation and economic inequality. Is increasing our economic growth worth the economic inequality that will result? Other ideas were mentioned in the Krugman vs Summers debate , such as expansionary fiscal and monetary policy. But as Brad Delong notes, debate partners Krugman and Rosenberg couldn’t even agree on a solution. This just further indicates that Americans are far from agreeing on an effective solution.

What is most alarming to Americans is whether or not the employment rate will continue to rise, healing the economy, or if the slow pace of job increase is an indicator that economic growth will taper off. Are we to face a “Japan-style era of high unemployment and slow growth”? The fate of the American economy, though not entirely grim, remains unsure. Like the article says, it could be worse. 

7 comments:

Katherine La Serna said...

I agree with Amy that the US economy is not entirely grim as people think but it does still remain unsure. Fewer Americans have filed first time claims for unemployment insurance payments last week than expected, which has been the lowest level since April. This is an indicator that the labor market may be gaining some traction. Firings are now starting to diminish since it seems that sales have grown more than expected. Holiday sales may bring brighter employment prospects since after all Christmas is the time of giving and presents. If sales continue to increase this can mean that business will have higher level of outputs leading to more employees needed. Although, even though lay-offs have eased, companies are still very hesitant to hire. The Federal Reserve, however, should stop debating on what to do and start taking action by adding additional measures to increase job opportunities for unemployed Americans and to create a faster recovery.

Sophia Wu said...

I agree that the US economy may not be as terrible as people make it out to be, but it's definitely nowhere near where we want it to be. Like Amy said, if economic growth cannot keep up with population growth, the miniscule positive aspects don't really mean anything. Furthermore, I would say that healing the economy should take precedent over economic inequality. I think that the nation as a whole will prosper more with greater economic growth than decreasing economic inequality in a time of economic crisis. It's up to the private sector to stimulate the US economy again and I think that, at least until the economy is growing at a healthy rate, the issue of economic inequality should not be a top priority.

To comment on Katherine's point about increased expenditures due to holidays, I do agree that sales will increase during the holidays, but only with relation to the rest of the year. I think that if the increase in sales from the 2011 holiday season were compared to that of another holiday season that occurred prior to the economic turn, the increase would be significantly less. For the economy of the country to truly thrive, more action, whether through the government or private sector, must be taken.

vinhdoan said...

I think Sophia's point is very interesting. Sophia pointed out that holiday sales would be lower compared to holiday sales of prior years, an assertion that i thought worthy of investigation. Based on data from the National Retail federation for holiday spending from 2008-2010, sales were shown to be at a low in 2008, rising steadily for 2009 and 2010. Sales are also expected to rise by 2.8% ($465 billion) this year according to the NRF. This estimated amount is actually higher than reported sales for 2006, which was $460.2 billion. Now does that mean GDP will reach those same levels as it did in 2006? I'm not so sure but it would be interesting to see if there is some sort of correlation between holiday spending and economic growth.

data can be found on:
1.http://www.nrf.com/modules.php?name=Pages&sp_id=1234
2.http://money.cnn.com/2008/11/29/news/economy/holiday_shopping_sat/index.htm

Jan Galabay said...

St. Louis Fed Director Christopher Waller said, "No matter what we do, recovery is going to be slow."
This just proves that there are things that the Fed could not overcome. His comment shows that the Fed has done everything it could, but it seems that nothing is working. The Fed already cut interest rates to near zero and bought trillion in bonds just to boost the economy. However, this monetary policy was not enough to cure this deep recession. However, even if that is the case, the Fed still continues to apply some measures. For example, it shifted its bond holdings to longer maturity in order to lower to long term borrowing cost. It also promised to hold rates to assure markets that they will not raise. Fed economists said that there are other possible reasons for this slow process. For insatnce, some employer are reluctant to rehire workers especially with our unstable economy right now.
The construction jobs related to housing crash have experienced deep cuts. Recently, policymakers also discussed about expanding purchases of mortgage backed securities to help the housing market. It might help in slowing the decline in house prices. The unemployment rate is really a national crisis and it seems that we do not have a lot of options.There is no short cut to speed up the process.

quote and Fed's actions:
http://www.reuters.com/article/2011/11/16/us-usa-fed-recovery-idUSTRE7AF2PT20111116

Elise Yee said...

Economic recovery is occurring slowly but surely. As Sophia pointed out, sales are projected to increase this year. There have been signs that more green will be spent this holiday due to the increase in holiday sales and coupons. Although spending will not be as high as last year, it's still predicted that shoppers will increase spending by about 2.8%, 2.4% less than last year. I believe that these holiday spending can stimulate the economy again. With the holidays just right around the corner, I think we'll be seeing slight changes in the economy.

Additional data on holiday spending:
http://www.desmoinesregister.com/article/20111120/BUSINESS/311200056/-1/MARKETPLACE/Holiday-sales-predicted-up

KennyL said...

In addition to the private sector being responsible for job growth in America, President Obama's ARRA also has responsibility in job growth and decreasing unemployment rate.

additional information on the ARRA and its effects on the US economy: http://cboblog.cbo.gov/?p=2651.

Billy Seeburger said...

I think that the only time our economy has ever been "happy" and we see it that way is during a bubble, which is right before it all goes down hill. I agree with Sophia in how the economy is more important than equality, as long as it does not get out of hand, as with the big oil/ steel producers before. However, an increase is an increase and we should be happy about that. As for other problems like Europe and high exchange rates in Asia, they hinder the recovery and I believe that until they fix their respective problems, the world economy will not work as well as it can.