The current state of the economy is in question by the United States population. Unemployment, expectations, consumer income, and interest rate are the topics important to consumers and businesses. Understanding each area will allow to understand the state of the economy today.
Unemployment is part of the economy that the United States government has been working on getting lowered. Within a one month period there has been little change. “The unemployment rate in the United States decreased to 7.2% in September 2013 from 7.3% in August 2013” (Trading Economics, 2013). The change of the long-term unemployed individuals had very little change at 4.1 million, accounting for 36.9% of the unemployed. The effect of the long-term unemployment creates a hardship and increased the risk of suicide and potentially shortened life expectancy.
The government can assist with unemployment through policies they have in place. Some of the policies that can be implemented are educational advice, schooling and training facilities to prepare for new jobs, provide information on available jobs, incentives and regulations, tax incentives, and aid or grants to overcome specific obstacles. “While direct government intervention is inefficient in reducing unemployment, the government can remove other policies that make it harder for people to find work” (Boundless, 2013).
The current economy for the United States of America had high expectations for 2013, but the outcome is considered as “still stuck in the muck.” This was the conclusion that came when the report of the gross domestic product came out. The first three months of 2013 the United States economy grew 2.5% annual rate. This grew 0.4% of the last final months of the previous year of 2012. The economy analyst expected a percentage just above that result. Reports and the analyst were hoping for a self-reinforcing growth. These ideas need to be thrown out because 2013 did not meet up to those expectations.
The U.S. economy has been “muddling” at the same exact pace as the recession in 2008 through 2009. The economy does have its high times, which would be like time in the spotlight and when it is booming, but other times it drops below. These booming times brings high expectations for the economy. The analysts realize that even though it is improving not enough to meet those expectations a drop in how the government is spending the money coming in.
The U.S. government has been the biggest reason these expectations have not been met in years. The U.S. is stating that their government is the villain in making the economy rise and is slowing down the potential growth. Analysts are expecting the government to not spend and keep their spending at a steady, regular pace. If this were to take place they expect the GDP would average a growth of 2.55% instead of just the low 1.45%. The analyst have big expectations depending on government spending, the economy could rise and meet these certain types of goals.
Aggregate demands are the collective demands for goods and services from the economy at any time or price. The four elements used to calculate this are, consumer expenditures, investments, government spending, and net exports. Because of the current economy issues faced in the United States consumer demands are down. This is caused by a high unemployment rate (almost 8%) and the decrease in the total family income per capita.
Between 2008 and the present the nationwide average family median income went from 54,721 to 51,336 (U.S. Census, 2013). This has been because one or both family members losing his or her job, employers lowering wages or hours, and employees who have lost his or her job, and taking a lower paying job because he or she has no other choice.
President Obama proposed a $447 billion dollar jobs bill to Congress to help stimulate the economy and create jobs. Currently the bill is in limbo but several parts have been approved by Congress. An example is passing of the Water Bill that will cost the government $8.2 billion dollars will start projects on dams, harbors, river navigation, and other water projects that will be carried through the next 10 to 15 years (Washington AP, 2013).
At the present it is too early to determine the effectiveness of this or the follow on projects because they are implemented. The current attempts fall under the Keynesian model perspectives, whereas government is taking measures to change the current economic status of the country by starting projects and spending money.
Interest rates are another factor that can play a role in the strength of the economy. When interest rates are high, consumers, and businesses are less likely to make big purchases, thus decreasing demand on supplies and services. If interest rates are lower, consumers and businesses are more likely to make big purchases that require financing; this can lead to greater purchasing power and increasing demand on products and services. Currently, the interest rate is lower than it has been in history, but with the economic strength returning it would be presumed that interest rates will increase again to ensure inflation is controlled. Because the economy has come out of a recent recession it was viewed to be in the best interest of the economy to have lower interest rates to increase purchasing to increase the likelihood the economy would be repaired.
The government can also play a role in the interest rates, which can affect the economy and purchasing power of consumers and businesses. The government does this through fiscal policies. Fiscal policies can either increase or decrease the interest rates and impact the health of the economy. The government control of the interest rates to assist in a recession or to control inflation goes hand-in-hand with the Keynesian theory that states the government needs to step in to assist the economy through controls and measures to ensure it does not fail.