Macro and Micro economics’ Macro and Micro economics’ US economic growth has been remarkably slow all through 2011. The nation’s economic recovery has been disappointing since the financial crisis in mid -2009 with US GDP growing by 2% only. This persistent disappointing, slow GDP growth has resulted into high unemployment and slow growth as the main features to describe US economy. The financial crisis from US originated from the overhang of the house hold debt especially those in home mortgages. Global capitalists crisis have also contributed to the nation’s crisis; especially the European Crisis which destabilized US financial system by reduction of US net exports.
The government policy has also contributed to the financial crisis. Particularly, the forced spending cuts at the State, Local level. This move reduces GDP by half percent in the 2011 and has a possibility of doing further damage in 2012 (Perlo, 2012). Inflation is another significant problem. It has been rising by some measures, and the trend is likely to continue. In 2010, inflation rate was exceptionally low but recently we have witnessed a rate of inflation of about 2%.
The three principal components that have disproportioned inflation rate include increase and difficulty of obtaining mortgages, pushing populations into the rental markets. Also, the elevated vehicle prices due to supply disruptions by Japan’s catastrophes’. Last cause of the increased inflation rate is the temporary surge in apparel prices (United Nations, 2011). The above described trends results to slight deterioration in the unemployment rate. At the present pace of output growth, it is will take long before employment is back. Additionally, even those employed are contingent with no security at all.
In 1980’s, pensions and retiree healthcare were compulsory requirements for all medium and large companies but not emphasized in the currently. However, recent employment trend comprise of low wage able jobs with no security at all (Perlo, 2012). The value of the dollar has sustained its downward trend against other leading currencies. Despite the risks associated with the sovereign debt levels in various European economies, the euro has appreciated against the dollar by the first quarter of 2011. The dollar/ euro exchange rate is assumed to be 1.38 in 2011 and 1.28 in 2012.
US GDP has expanded by an average of 2.9% since 2009. This growth is mainly driven by domestic demand. However, weak net exports have consistently dampened the effect of this growth. By 2010, personal consumption has increased by 1.7 %. The corporate balance sheets used to facilitate investments increased by more than 15%. Government expenditure rose by only 1% due to the weak fiscal positions at the state and local levels. Labor markets growth has slugged keeping the wage growth in check.
The Fed has continued to keep the federal fund rate extremely low. For example, in November 2010, the Fed started the second round of quantitative easing. It targeted the purchase of $600 billion treasury security (United Nations, 2011). US potential risks include the global increase in commodity and oil prices. Also, the weakness in public finances and housing market will affect the country’s economy. GDP growth for 2012 is projected to be 2.6% accompanied by fall in the unemployment rate to 8.2%. Despite some progress in rebuilding balance sheets, their financial sectors of the leading US still look vulnerable to multiple risks such as weak housing markets, debt crisis and other economic weakness.
Additionally, the fiscal prices set have been shifting towards austerity as a strategic counteraction to the heightened concerns of the sustainable nation debt levels and weakened growth prospects in the short run (United Nations, 2011). References United Nations (2011) World economic situation and prospects 2011. Retrieved on March 1, 2012 from http: //www. un. org/en/development/desa/policy/wesp/wesp_current/2011wespupdate. pdf Perlo, A.
(2012) The US economic situation and the 2012 elections. Retrieved on March 1, 2012 from http: //www. politicalaffairs. net/the-us-economic-situation-and-the-2012-elections/