Introduction
World’s largest and the most influential economy, United States of America, is finally witnessing economic growth with rise in GDP multiple and fall in unemployment and budgetary deficit levels. In this paper, we will discuss the recent trends in these economic variables which will be supported by graphical figures and statistical data.
Increasing GDP growth rate
The US economy is back on the path of economic growth and is now regaining the traction. Boosted by accelerating business sector and increased consumer spending, the trend in all the economic indicators seems to be much appreciable, primarily the GDP, which is the most reliable indicator of economic growth, grew by 4.6% by the end of September, 2014 in comparison to a negative growth of -2.1%, thus averaging at 3.5% for three of the past four quarters. In addition, the market economist are also impressed with the economic rebound and suggest that if the growth in GDP multiple crosses 3% in the third quarter; this will be longest stretch of the economic growth for the US economy since 2004-2005.
Declined budgetary deficit
Although the optimistic signs of GDP growth indicate the growth for the overall economy, but the most relieving macro-economic issue for the United States is the narrowed budgetary deficit of the country that is reported to be has been reached at the pre-recession levels. As per the latest data issued by Congressional Budget Office of United States, the budgetary deficit levels have now decreased to the level of $486 Billion, accounting for 2.9% of the GDP of the country.
Amid the growing economy it was the increased corporate profits and the taxable income of the US households that lead to a significant fall in the budgetary deficit through increased tax revenues of the government by 9% to $3.021 Trillion during the Fiscal Year of 2014. During September, which is the last month of the fiscal year and also the month of quarterly tax payments of the individuals as well as the businesses, the budgetary account recorded a surplus amount of $105.81 billion.
Another factor that could be attributed to the decreased budgetary deficits is the $1 Trillion cut in the discretionary domestic and defense spending by the federal government.
Declining Unemployment Rate
The improving economic condition of the US economy is also witnessed through the declining trend in the unemployment rate which during October, 2014 slumped to 5.8%, lowest level since the recession period of 2008. According to the latest statistical data issued by Bureau of Labor Statistic, around 214000 jobs were added in the US economy against 142000 in August, 2014. Market economists are expecting that the economic rebound will continue in the economy and unemployment rate will continue to fall in the future with another 203000 jobs expected to be added in the month of November. Below is the statistical data and graph relating to the unemployment rate in the United States:
Appropriate Federal Policies
Now since the US economy is heading high with increased productivity and reduced unemployment levels, Federal Reserve should continue to keep the interest rates within the range of 0-0.25 percent. Important to note, post the advent of the financial crisis of 2008, Federal Reserve has taken numerous actions to ensure price stability and to improve the labor market conditions. However, it was only the Fed decision to reduce the interest rates at 0-0.25 percent range so as to stimulate the economy that proved to be successful in re-engineering the US economy. Hence, it will be required that FOMC supports the progress and keep the interest rates intact at the current level and not increase it as doing so may yet again discourage the economic activity. However, Federal Open Market Committee (FOMC) may cut down its asset purchase program as the US economy moves toward its target long-term inflation rate of 2 percent.
As for the Fiscal Policy, the Federal Government should avoid any further increase in payroll and income taxes.
Conclusion
At the conclusion of this report, we can be assured that under growing GDP, lower unemployment and federal deficit, US is back on the path of progress and if supported with appropriate federal and monetary policy, the nation may soon experience the prosperity of pre-recession levels.
Works Cited
Unemployment Rate Decline Points To A Bright Future For ADP And Paychex. (2014, December 2). Retrieved December 4, 2014, from Fobes: http://www.forbes.com/sites/greatspeculations/2014/12/02/unemployment-rate-decline-points-to-a-bright-future-for-adp-and-paychex/
Gross Domestic Product (GDP) Graph. (n.d.). Retrieved December 4, 2014, from Bureau of Economic Research: http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm
House, J. (2014, October 15). Budget Deficit Returns to Prerecession Levels. Retrieved November 15, 2014, from http://online.wsj.com/articles/u-s-budget-deficit-in-2014-narrows-to-lowest-level-in-six-years-1413385493#livefyre-comment
Mitchell, J. (2014, September 26). U.S. Economy Grew at 4.6% Rate in Second Quarter. Retrieved December 4, 2014, from Wall Street Journal: http://online.wsj.com/articles/u-s-economy-grew-at-4-6-rate-in-second-quarter-1411734858
Unemployment Rate. (n.d.). Retrieved December 4, 2014, from Bureau of Labor Statistics: http://data.bls.gov/timeseries/LNS14000000
