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US Economy and Influence of Policies Essay

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Updated: May 14th, 2019

Since the 2008 economic crisis, the status of the US economy has been undesirable. From this period, the US economy has failed to record any meaningful growth or development. Although there were expectations that the economy would recover after the financial meltdown, the status has not improved.

As Foroohar (1) observes, the Obama administration was about to begin registering growth before discouraging data began streaming in. To begin with, the increase in GDP was far below the expected levels, as future forecasts did not show any sign of improvement. Worse still, the housing report revealed that prices were declining to levels that have never been witnessed.

In addition, consumer spending was declining. When consumer spending falls, the manufacturing sector is negatively affected. Overall, unemployment rates are also likely to increase, as job creation falls below the expected levels.

Despite the idea that the American corporations have huge resources, they are not ready to use them to hire new workers locally. This implies that the American economy has to look for alternative ways of addressing the unemployment problem that seems to rise each passing day.

The idea that economic growth does not match earlier forecasts serves to underscore the belief that the economy has a long way to go before getting out of the recessionary state. The unemployment concern is serious since there is a group of workers who cannot find work to do (Foroohar 1).

The US economy has also been affected by poor policies. As an illustration, the Federal policy of raising money supply partly contributed to increasing inflation. This was possible as a big percentage of the money was channeled to the stock markets, an aspect that proved beneficial to the rich class of the population.

However, unlike what happened in 2008, the US is likely to find it difficult securing support from the rest of the world, especially from Europe and China. This view is held since Europe is facing a debt crisis while China may be unprepared to engage the US in the same way as it did in 2008 (Foroohar 2).

The American economy has undergone a number of changes in the recent times. By way of illustration, several people residing outside the US are able to handle jobs that were previously reserved for the Americans.

In addition, the developments made in technology allow companies to carry on their activities without the need to hire more people or by reducing the number of workers (Foroohar 2). This state has definitely played a big role in undermining hopes of the unemployed people in the United States.

Based on the above discussion, the US faces a major concern about the need to avert a double dip in the economy. The focus on a double dip is necessary since the economy is yet to recover from the effects of the previous crisis. However, if the economy does not slide back, fears persist that the problems associated with recessionary effects are likely to continue.

Consequently, economic growth and unemployment would worsen and lead to a snowball effect within the economy. If a second dip occurs, it is expected that the US economy would need five more years to bounce back. During the dip, GDP growth rate and consumer demand would fall thereby worsening an already bad situation.

This point illustrates the idea that the US is no longer able to recover from economic slowdowns as fast as it used to do in the past (Foroohar 2). Another element that characterizes the US economy based on this point gravitates around the time required for an economic recovery. Initially, the US economy would take around six months to recover from economic shocks. This aspect has changed since it now takes roughly five years.

The use of economic stimulus to jumpstart the country’s economy each time it experiences credit crunches, seems to be assuming previously un-witnessed significance. Earlier on, as the Obama administration took power, economic stimulus packages were extended. This trend is likely to continue if the economy slides into another recession.

Although such a move is not a bad one, chances are that it may create a money bubble. This view held since, the move holds the potential of lowering interest rates. As such, homeowners are able to refinance mortgages easily. However, this may not be achieved, as job cuts compound the situation. Hence, the real estate market may not benefit from the use of economic stimulus packages (Foroohar 2).

Companies in the United States are exploiting workers. This is based on the revelation in the article that workers are earning less compared to what they were earning during the recession time. It is alleged that companies understand what the unemployment situation is and they are taking full advantage to exploit labor as it is in excess supply (Foroohar 3).

Emerging markets such as China, Brazil and others are contributing to the problems that are facing the American economy. As the article establishes, many firms would rarely consider investing in new business or research centers in the US since alternative markets are more attractive because less expenses are incurred.

This explains why wages continue to decline in the US while job opportunities become scarce. Based on this discovery, it seems that globalization has negatively affected the growth rate of the American economy (Foroohar 3).

American mobility has gone down. Earlier on, it was thought that creating jobs would persuade people to move. Contrary to this view, people are no longer willing to move. This is partly attributable to the changing family and career dynamics. As these aspects change, people begin ranking independence highly. Additionally, women are now earning more and thus, they are unwilling to be moved around by their spouses (Foroohar 3).

Another issue being experienced in the American economy is structural unemployment. The article points out that the skills available in the labor pool do not match with the jobs on offer. If an economy pursues advancement, it is necessary to align labor production to industry requirements.

Without such an alignment, the economy faces a difficult challenge, as a mismatch in skills does not support economic development (Foroohar 3).

Apart from an alarming rate of total unemployment in the US, the youth unemployment trends are worrying. It is clear in the article that a group of workers faces a danger of permanent relegation from the job market.

The sad aspect centers on the likely consequences of such unemployment statistics on the American society. Youth unemployment stands at twenty-four percent. Worse still, even if this group was to secure jobs, it would earn twenty percent less than what other groups do earn (Foroohar 4).

Works Cited

Foroohar, Rana. What U.S. Economic Recovery? Five Destructive Myths. 2011. Web. 19 October 2011.

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