The greatest worry currently plaguing the US economy is the fear that another recession might be in the offing. This is due to the high inflation, high unemployment rates and other retrogressive economic conditions. In September, the US economy created 103, 000 jobs which was about 43, 000 jobs higher than had been forecasted. While this number would be high for a smaller country, it is still insignificant for the American economy. It is also important to include the fact that this number included about 45, 000 workers employed by Verizon who were rehired after being layer off for going on strike. With a high unemployment rate at 9.1 % and a lower GDP at 1.7 % growth compared to 3 % in 2010, concerns about the stability of the markets has tipped again. This level of growth means that any changes to the interest rates will have to be halted or postponed to such a time that the economy is stable enough to hold a range higher than the current 0-0.25 %.
The 9.1 % unemployment rate means that a large number of people are jobless and have remained so for too long. This has brought an issue even for the 103, 000 people who were lucky enough to get jobs in September because a job bias existed in most spots. The fact that corporations are not willing or are not financially stable to fund the retraining of the unemployed as they transition means that those who have lost their jobs most recently are most likely to find others sooner than those who left earlier. This is the main reason why current fiscal policy has been geared at trying to increase borrowing so that corporations can afford to expand and hire more people. This would also spur an increase in household spending which is a very significant part of GDP and growth of market demand. This is because most people are still paying the debts they incurred during the recession and therefore keep their other forms of spending at a bare minimum.
Another problem is brewing in Wall Street. Protestors are gathering in droves to show their discontent with what they term ‘corporate greed’. The cause of disagreement is the feeling that the bailout of Wall Street at the height of the recession in 2008 is responsible for the current levels of job insecurity and unemployment. The US economy is also jittery about the debt issues in the European market because of the close connection between these markets. The lowering of credit ratings for Italy, Spain, UK and the looming financial crisis in Greece and other European economies have placed US banks at great risk.
In an effort to lower the mortgage rates and other costs of borrowing, the US financial centers have started buying long-dated Treasuries while it sells short-term debt. In what has been dubbed, “Operation Twist” the fed authority has sort to stimulate the level of borrowing from the current lows, which are an aftermath of the recession.
The current Federal Reserve measures are inflationary because they have centered on an economic stimulus. The stimulus package introduced was not comprehensive enough to incorporate a significant push in demand. The policies that are still in force are expansionary fiscal policies that have a monetary element. It would be more effective to try to reign in this policies and concentrate on polices that will increase the demand in the economy and in extension; allow the market to create more jobs.
References
Wiley, Judy (2011). Fed’s Fisher Worried About Jobs, not Inflation. Yahoo! News. Retrieved from http://news.yahoo.com/feds-fisher-worried-jobs-not-inflation on 10 October 2011.
