American Productivity Case Study

Considering the general outlook of the American economy, it is prevalent that the region’s economy recorded a slow growth during the last quarter of 2015. The level of GDP rose at an adjusted rate of 0.7% during the fourth quarter. A slump was also noted on the level of fixed investment based on the fact that energy companies responded to a decline in export growth and low prices of oil as a result of a strong dollar rate. During the fourth quarter, it is evident that private consumption was moderated despite the fact that it remained resilient within the uncertain economic environment. Despite this, the economy American economy exhibited growth by 2.4% during the 2015 year with an indication that the steady growth is likely to be noticed in the year 2016. The manufacturing sector is anticipated to continue recorded a negative growth level with the labor market expected to grow continually and even strengthen in the upcoming months. Despite the sluggish growth recorded, it is a fact that the American economy is among one of the strongest economies across the globe. The economy’s output account for approximately 80%.

It is a fact that the American economy is slowly growing. According to various economists, the growth records a potential output of 1.6% to 3% in GDP in the next few years to come. Output per hour is one of the measures that can be implemented in measuring the productivity growth in the region’s economy other than just within its private sector. To arrive at the output per hour figure, it is evident that unpublished data series gathered must by the Bureau of Labor Statistics must be utilized for the aggregate value of the hours worked across the region’s economy.

It is evident that the American economic performance before 2014 is not that bad. However, when an individual analyses the 2014 financial data, it is prevalent that the weak productivity performance is evident through the first half of the year as a result of a sharp increase in the number of working hours for the people. According to Powell and Smith (2016), labor productivity within the American economy provides a measure of the labor input in the American economy.

The slow GDP recorded within the recent years within the American economy is counteracted by decent gains in employment  based on the fact that productivity has also recorded a rapid slowdown. Besides the bolstering level of GDP growth in the region, the productivity of labor have the ability of contributing towards alleviating the consistency of the country in terms of wage gains. Prevalently, increasing the level of output within limited working hours has the ability of encouraging the American employers to expand their company’s workforce or even increase their salaries. Incidentally, the recorded gains have the ability of being perceived favorably by the employees in America, particularly the ones who have experienced the worst form of compensation from the government since the 1980s.

Economists have proven that if the level of productivity growth does not improve, then a drag is likely to be noticed on the level of potential output determining how the state of economy can be. York (2015) depicts that internal investments have the opportunity of going a long way towards enhancing the productivity levels within the American economy taking into consideration the propensity that the American employers have when running equipment. It is a fact that industrial equipment is still being utilized in the U.S  since the 1938 (Powell & Smith, 2016). The use of outdated resources such as industrial equipment inherently provides a setback on the level of production that the employees have the ability of producing.

Despite the existing need, the measure of the private nonresidential investment by the government during the 2015 second quarter recorded a 0.6% decline for the first time after the 2012’s third quarter. The private nonresidential  equipment in this case includes equipment, firm’s spending and intellectual property. York (2015) posits that in cases where the a business does not have a decent business investment, especially if a continued improvement is noted on the labor market, chances are higher that a real risk will be noticed in the economy with a sluggish level of productivity.

Looking at the American economy, it is also evident that the level of investment in new equipment by the private-sector dropped by a considerable 4.1% during the second quarter of the 2015 financial year. This formed a basis of one of the worst spending periods that the country had to face after the 2009 Great Recession. Investments in areas such as research, development and software increased by a small percentage of about 5.5% during every quarter. This was the lowest most recorded increase since the onset of 2014. Taking into consideration the non-residential structure investment, it is a fact that the levels of the identified group of investment declined consecutively for the past five quarters. A similar case was last noticed in the year 2009 and 2010. The nonresidential investments in this case includes the levels of private investments on manufacturing plant and  healthcare facilities  among others.

Taking into consideration the AS-AD model of macro economy and its applicability within the American economy, it is evident that  an average increase in the economic prices prompts foreigners, businesses and government to purchase less. This is explained by a wealth effect that arises in this case (Powell & Smith, 2016). Incidentally, with an increase in the level of economic prices, the level of output demanded declines considerably. This is accrued to the fact that American people have a limited amount of real wealth. In addition, it is also prevalent that an interest rate effect has the potential of developing within the economy. Incidentally, with an increase in the average price levels within the US economy, consumers, foreigner, and businesses tend to purchase less. This is accrued to the fact that an interest rate effect arises in this case. An increase in the level of prices within the economy means a decline in the amount of output demanded as well as interest rates.

York (2015) explains that the identified conclusion is arrived at based on the fact that the Americans will purchase less of the commodities available in the market whereby they will be required to borrow money in order to make the identified purchase. Foreign purchases effects is also a common occurrence in the economy. Incidentally, an increase in the level of prices of commodity within the U.S economy  means fewer purchases by consumers, governments, foreigners and businesses. This is accrued to the fact that an increase in the average price levels means a decline in the amount of demand for the outputs in the economy. The conclusion is driven by the fact that the Americans will opt to purchase the relatively cheaper commodities from manufacturers.

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