Current Macroeconomic situation in USA - Essay Example

Current Macroeconomic Situation in USA Introduction Macroeconomic situation of any country at any given time has a lot to do with the well being of its citizens. The paper attempts to explore the macroeconomic situation of USA with a particular reference to the trend in unemployment rate, inflation, GDP growth rate. The paper will also explore how fiscal and monetary policies will be able to influence important macroeconomic factors of the country. Unemployment Rate and its Trend in USA The unemployment rate registered during the month of January 2012 was 8.3%. The unemployment rate is hovering around 9% since last 12 quarters.

Nonfarm payroll employment rose by 200K in the month of December, 2011. Major jobs gains were noticed in retail trade, health care, manufacturing, transportation sector. It has exhibited downward trend in unemployment rate but not to the extent as desired. (Econedlink 2012) Inflation Trend The consumer price index remained the same for the month of November and December 2011. Barring food and energy items, inflation had a marginal increase of 0.2 and 0.1percent in the month of November and December, 2011.

(Econedlink 2012) Federal Interest Rates The current interest rate for federal funds is ruling between 0 to 0.25 percent and that is likely to remain in that range until at least 2013. (Econedlink 2012) GDP Trend Real GDP growth rate in the third quarter of 2011was found to be increased by 1.8 percent over second quarter of 2011. In the second quarter, real GDP increase was 1.3 percent. Thus, the US economy has exhibited a rising trend in the growth rate of GDP. (Econedlink 2012) When GDP growth for two consecutive quarters is negative, economy is said to be in grip of recession.

The last two quarters of 2008 and then the first two quarters of 2009 experienced negative GDP growth in US and the country experienced one of the worst recession in last several years. Velde (2011) reports through CNBC the opinion of Charles Evans, Chicago Federal Reserve President, on the US economic condition stating that it has deteriorated in the year 2011. Fiscal and Monetary Policy Adjustment Currently, 14 million Americans are unemployed and that is the biggest worry for US. High unemployment rate over 8 percent continues since the third quarter of 2008.

Reducing the unemployment rate below 6 percent should become a prime objective at the cost of little more inflation. Keeping the long-term inflation target as 2 percent, it is a time to employ expansionary fiscal tools to increase the aggregate demand. The important thing is that government should focus on many areas of the economy simultaneously to direct its spending so that it triggers several businesses of the economy and it does not get concentrated on certain pockets. It will be not out of place to state that the country has shown positive growth in last few quarters and therefore country is surely out of recession but not out of crisis because unemployment rate has not reduced to a desired level.

On monetary front, Fed has already brought prime interest rates to the lowest possible and FOMC has already confirmed that they will keep low interest rates until at least mid 2013; however, credit control should be eased so that it could give a real boost to the economy and reduce unemployment rate. References 1. Econedlink (2012), Current Key Economic Indicators, retrieved February 12, 2012 from, http://www.econedlink.org/economic-resources/focus-on-economic-data.php#real-gdp 2. Velde A. (2011), US Economy Is Basically Still in Recession: Feds Evans, retrieved February 12, 2012 from, http://www.cnbc.com/id/44421047/US_Economy_Is_Basically_Still_In_Recession_Fed_s_Evans