Introduction
US economy experiences adverse effects occasioned by the recent deadly economic recession that hit the entire world. This economic recess arose as a result of complex factors such as energy crisis and political instability in oil producing and exporting companies. US government stance on war against terrorism led to a sour relation between the US and Middle East countries. This further has hit the US economy hard. This paper attempts looking at the current state of US economy in various sectors of the economy according to St. Louis Federal Reserve Economic Data (FRED). These sectors include housing, investment, and employment, and industrialization, money lending institutions, energy, and infrastructure.
Employment
The global economic crisis led to drastic reduction in revenue raised by the federal government. As a result, several sectors of the country’s economy cut down the operational costs in several ways. One such way includes retrenching workers. In addition to this, new jobs become difficult to create, as the economy cannot sustain them. As a result, there are far reaching effects like increased dependency ratio and reduced saving potential. Citizens in this case have low investment potential. In overall, the economic growth of the US reduces significantly. According to the Federal Reserve Economic Data employment reduced by close to 6% between the years 2003 and 2010.
Housing
The housing sector experiences stunted development brought about by the prevailing harsh economic situation. Reduced lending capacity, high lending rates by financial institutions and reduced income limit the potential growth of the housing sector (Lind 45). The Federal Reserve further lowers the interest rates on people’s savings as a result of increased withdrawals making the dollar worth less. This, in effect, discourages citizens from withdrawing the cash saved that would have been injected in the housing sector. Subprime mortgages have high interest rates than even a prime loan making those unable to finance a prime loan shy away from mortgages. As a result home ownership eludes them decreasing the growth of this sector. Data reveals diminishing growth in US housing sector to about 6.2 % in the last 7 years.
Energy Sector
Oil and gas prices are all time high discouraging consumers from buying more. This implies that citizens spend more to get to work despite reduced earnings at work. Further, families use a single vehicle to take them to work so as to reduce fuel used. The high fuel costs force citizens to avoid travelling for vacations and going for shopping sprees. Increased fuel cost leads to high cost of production that in turn increases the cost of commodities. This further increases the expenditure of citizens. St. Louis data shows that the car loan interest rates increased from 2.5% in 2003 to 7.5% in 2010. The federal government provides grants to giant companies such as automobile companies to help them survive this harsh economic time.
Lending Rates
Financial institutions drastically increase the money lending rates as a result of the operational constraints encountered. Data shows that most banks increased these rates from 2.5% in 2002 to about 8% in 2010. Mortgage rates on the other hand are up to about 6% although the trend reveals a drop in the rates. High lending rates scare citizens from taking loans and mortgages. As a result, the economy suffers more recess as no money is injected in form of investment.
Conclusion
In summary, the US economy is undergoing severe times calling for extraordinary measures in fiscal and monetary policies to restore normalcy. These policies are designed to expedite positive growth in virtually all the affected sectors of economy some of which are mentioned above. The gross domestic product graph below says it all about the US economic recess.
Work Cited
Lind, Michael. Land of Promise: An Economic History of the United States. New York: HarperCollins, 2012.
Louis, Federal Reserve Bank of St. Econmic Research. Web. 23 Sept 2012. 08 Jan 2013
