USA Economy and the Business Cycle - Research Paper Example

US Economy and Its Stage in the Business Cycle The business cycle is a graph consisting of peaks (ups) and troughs (downs), which indicate the economic activity of a particular country in terms of periods of expansion or contraction. The National Bureau of Economic Research (NBER) defines certain indicators including Gross Domestic Product (GDP), Composite Coincident Indicator Index, Consumer Price Index, and so on so as to designate the business cycle and the phase of the cycle on which the US economy is lying.

The NBER determines the turning points by assessing the nature of variables such as employment, production, real income, and sales, over time. A recession comprises a period of contraction: a downfall in the above variables that spans for more than a few months. The US is currently in the recovery stage while a great number of states within the US are actually going through expansion. The US economy saw an increase in the annual rate of GDP and the unemployment rate fell as thousands of jobs were created.

However, despite the growth in GDP, the job growth rate is slow. By the third quarter of 2013, the real GDP rose by 4.1 percent showing promising signs (Bureau of Economic Analysis (BEA), 2013). While the revenues of American companies have also risen by a large fraction, they are only hiring carefully to fill positions strictly required by them thereby reducing costs in an uncertain external environment. Considering the historical trends from the NBER (2013) data, the US economy is experiencing an economic expansion and should be turning into a contraction by the year 2014.

Although the data presents a drop in the unemployment rate nevertheless the rate is still high. Therefore, even if the US markets are doing well, a large number of Americans still remain unemployed. Thus, the forecasters are predicting a declining economy in 2014.