Intro to Macroeconomics
Staycee Furukawa
ECO 106
Final Paper
6 June 2011
Future U.S. Economy
The United States’ economy just experienced the biggest and longest economic downturn since the Great Depression in the 1930’s. What we now call the Great Recession lasted from 2007 until 2009, and the U.S. economy is in the state of recovery currently. Many actions were taken to try to get out of the recession and rebuild the economy. So far the economy is getting stronger, but it will not be a continuous growth. Within the next year to two years, the U.S. economy will experience growth, but it will take on the bathtub effect which means that there will be a pattern of growth and decline, but the growth will outweigh the decline.
The Obama Administration used active fiscal policy to help the economy recover by implementing a 787 billion dollar stimulus package. The package was highly effective in restoring the economy. For example, it created jobs, extended unemployment benefits, and reignited the housing market again. Just when the stimulus kicked in, the recession came to an end. However, the point of the stimulus was to short circuit the recession and spur recovery (Zandi 2). It definitely did its job, but the effects will not be long-term. Therefore, the government must use other methods to keep the economy on an upward turn.
Currently, the economy is slowing down which is one of the standstills that it will experience during the recovery process. One of the major factors that is contributing to the decline is the labor market. The employment growth rate is slowing rather than accelerating. This shows that businesses are turning more cautious and the soft patch may last through the summer. One of the major problems, according to Phil Izzo, is “the lack of wage growth among those with a job and those gaining new employment. Between labor market slack, which reduced bargaining power among the employed, and the mix of job creation being on the lower end of the scale, there has been no
ECO 106
Final Paper
6 June 2011
Future U.S. Economy
The United States’ economy just experienced the biggest and longest economic downturn since the Great Depression in the 1930’s. What we now call the Great Recession lasted from 2007 until 2009, and the U.S. economy is in the state of recovery currently. Many actions were taken to try to get out of the recession and rebuild the economy. So far the economy is getting stronger, but it will not be a continuous growth. Within the next year to two years, the U.S. economy will experience growth, but it will take on the bathtub effect which means that there will be a pattern of growth and decline, but the growth will outweigh the decline.
The Obama Administration used active fiscal policy to help the economy recover by implementing a 787 billion dollar stimulus package. The package was highly effective in restoring the economy. For example, it created jobs, extended unemployment benefits, and reignited the housing market again. Just when the stimulus kicked in, the recession came to an end. However, the point of the stimulus was to short circuit the recession and spur recovery (Zandi 2). It definitely did its job, but the effects will not be long-term. Therefore, the government must use other methods to keep the economy on an upward turn.
Currently, the economy is slowing down which is one of the standstills that it will experience during the recovery process. One of the major factors that is contributing to the decline is the labor market. The employment growth rate is slowing rather than accelerating. This shows that businesses are turning more cautious and the soft patch may last through the summer. One of the major problems, according to Phil Izzo, is “the lack of wage growth among those with a job and those gaining new employment. Between labor market slack, which reduced bargaining power among the employed, and the mix of job creation being on the lower end of the scale, there has been no
Cited: 1. Fair, Ray. "U.S. Forecast." Estimating How the Macroeconomy Works. 28 Apr. 2011. Web. 1 June 2011. 2. Izzo, Phil. "Economists React: Consider Me Worried." Wall Street Journal (Online). 3 June 2011. Web. 3 June 2011. 3. Packowitz, Howard. "Fed-Funds Futures Cut Odds of Early 2012 Rate Increase." Wall Street Journal (Online). 3 June 2011. Web. 3 June 2011. 4. Soloman, Deborah, and Randall Smith. "Banks May Need More Capital." Wall Street Journal (Online). 4 June 2011. Web. 4 June 2011. 5. "U.S. Macroeconomic Outlook." Dismal Scientist. 13 May 2011. Web. 1 June 2011. 6. Zandi, Mark. "The Impact of the Recovery Act on Economic Growth." Dismal Scientist (2009): 1-17. Web. 1 June 2011.