US Business Economics Development - Essay Example

Running Head: ECONOMICS OF BUSINESS Economics of Business of the of the Economics of Business Introduction Currently, United States has been facing various problems top of the list are struggling economy, two wars pollution, excessive relying on exported oil, poor health care and illegal immigration. (Omi, 2006) Analysis of Strengths, Weaknesses, Opportunities, Threats, and Trends is the most accurate, efficient and cost-effective way to get a solid understanding of a business. The first key to a good SWOTT is to ask the right questions, and good judgment is required in synthesizing information to developing the Strengths, Weaknesses, Opportunities, Threats, and Trends in Economy of Business in the United States of America (Ranseen, 2004). US Economy 2006 The economy showed signs of a slowdown, though not to the point of recession. The GDP growth of only 1.1% took many economists by surprise and was the lowest rate of growth in three years (Porter & Bajaj, 2006). The GDP reported disappointing end-of-year results for the automotive industry in the U.S. Economists believed this to be the result of high gas prices and the expiration of deep discounts from the summer and fall seasons, which automakers instituted to improve domestic sales. Many U.S, economists predicted a normalization of sales and economic growth within the first half of 2006. Though some experts were not so optimistic. Robert J. Barbera, chief economist at Investment Technologies Group, Inc. and Charles Dumas, the chief international economist at Lombard Street Research in London predicted a slowdown, if not an outright onset of a recession by the end of the year (Porter & Bajaj, 2006). According to Steve Goldstein (2006), "Home Depot rose 3% in the pre-open after it earned $1.3 billion, or 0.60 cents a share in the 4th quarter of year 2006. This rise was up from 0.47 cents a share or $1 billion within the last year. The revenue for Home Depot has risen 16% while store sales were up. The Gross Domestic Product (GDP) according to the Bureau of Economic Analysis had a slow-down in the fourth-quarter growth. This primarily reflected a deceleration in consumer spending (2006). The annual growth for GDP was 3.5% which was unchanged from the estimate in February. According to the United States Department of Labor Bureau of Labor Statistics, the unemployment rate in April 2006 was 5.10 % in Texas 4.6% in San Antonio, Texas, and 4.7% nationally, which was comparatively the lowest rate since 2001. The relationship between supply and demand became precarious as unemployment affected the industry in several ways as (a) consumers were unable to afford , (b) unfilled jobs in the industry affect the availability of products (c) the overall influence that the unemployment rate can have on the economy of the nation and/or a region. Bureau of Economic Analysis showed a rise in personal income to $88.8 billion, i.e. 0.8% and the disposable personal income raised to $78.4 billion, equaling 0.8%, in 2006. Negative personal saving reflected personal outlays that exceeded disposable personal income, saving from current income may be near zero or negative when financing outlays by borrowing or selling investment or other assets. The Federal Reserve affected the economic and financial decisions of virtually everyone, from a family buying a house or making a sound decision to purchase into the auto industry. In the global economy, the Federal Reserves actions showed significant economic and financial effects around the world. Federal Reserve policies tried to help people and business by fostering a sound banking system and a growing economy, with maximum sustainable employment and stable prices. Inflation was a persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money. The following items were represented by the CPI as all goods and services purchased for consumption by the reference population: Food and Beverage, Housing, Apparel, Medical Care, Recreation, Transportation, Education and Communication and other goods and other services like tobacco and smoking products, hairstyling and other personal services and funeral expenses. etc. US Economy 2007 US economy growth continued to expand by 5.7 % in 2007 which was followed by 5.5 percent growth in the first quarter compared to 5.9% in 2006. Despite a slow growth in US economy especially in the stock market, high demand in domestic consumption contributed to Country economy growth. Country’s growth occurs in the domestic production, strong private consumption, high investment and favorable export performance. Economists predicted, the Country economy is expected to growth between 5.6 and 5.8 % during 2007 and the 2008 respectively. US GDP growths remained strong at 5.7% in the second quarter compared to 5.5% in the 1st quarter of 2007. This was the result of high performance in the services, mining, and agriculture and quarrying sectors. The services sector continued to be a major contributor to the GDP growth by registering 9.2 % in the second quarter and the recent campaign of visit Malaysia year 2007 boosted the industry. Inflation, as measured by the consumer price index (CPI) was significant high during 2006 before it declined in early 2007. However, the CPI increased to 1.6 % in July 2007. The higher inflation rate in the alcoholic beverage and tobacco category reflected the impact of higher excise duty on these products. Following the government imposition of higher excise duty on these commodities. The inflation rate of alcoholic beverage and tobacco increased to 13.9 % in December from 4.7 percent in June 2007 and they have both contributed 0.3 percent to overall CPI. The inflation rates of other commodities remained unchanged, the clothing, footwear and communication categories continued to experience a declining prices level and therefore offset the increase in the CPI. The unemployment rate became 3.4 % in first quarter of 2007. The country achieved a full employment situation since 1992 with the unemployment now below the natural of unemployment. As productivity continued to grow, the demand for increase in wages and inflationary pressures from wages increased was likely to occur any day. There was an increasing job opportunities following sustained and expansion in the domestic economic activities. There had been a growing employment in the services and manufacturing sectors but the undergraduate unemployment was increasing significantly and a continuing effort was needed to increase the employment of skilled workers and minimize job mismatch with worker. The Country economic growth had been growing at stable level mainly because of high domestic demand, low interest rate, positive external trade balance and increase in 2007 budget. Furthermore, to improve the economic growth rate to an elite level, it was suggested that the central bank must cut interest rate by 25 percent basis point to 3.25 percent to stimulate domestic demand, increase investment and borrowing rate. This reduction in interest would not affect saving due to high disposable income by household. Also the central bank was asked to reduce money supply (M3) to strengthen the ringgit to be consistent with major currency and balance both exports and import growth to maintain the reserves level. U.S. Economy 2008 At the start of year 2008, various industries of private sector of the U.S. announced more than 100000 jobs and the unemployment rate was increased to 4.9%. The Supply Managements institute’s manufacturing index activity was raised to 50.7, which was back to above 50 thresholds which shows expansion consistent with the GDP growth of about 2%. Approximately 93% of the purchasing managers mentioned no effect of turmoil in financial markets on their companies capacity to gain additional or regular financing. That situation showed that the turmoil was restricted to subprime households and Wall Streets. But after second Quarter and the third Quarter, the U.S. economy had stumbled. There was a decline in residential investment to 23.9% and in the inventory investment which almost finished off the gains in consumer sector spending raised by 2%, business investment rising 7.5%, and exports up to 3.9%. (Vardy, 2008) Since the financial crisis was getting more serious, so the unemployment rate was increasing, that also resulted in the the violation of credit system. However by end of 2008 the most significant outcome of the presidential term was the unemployment rate that decreased from 22% in 2000 to 9% in 2008. Establishing an aggressive fiscal and monetary policy for the first five years allowed a boost in the economy. Slowly tightening government spending and open market operations kept the inflation rate at five percent. The economy of the United States is now experiencing numerous problems. While most of the wages remain on the same level, prices on necessities rise. The GDP of the third quarter in 2008 was negative because of the decrease in consumer spending. After the long term economy boom, the Federal Reserve decreased the interest rate year by year after 911. Since the first two years, the decreasing was too much that the real interest rate was even negative sometimes. Although the interest rate was increased 17 times after that, Federal Funds rate increased from 1% to 5%, American Dollar was still in long term Devaluation. The consumer financial education also needed to be increased. The financial crisis is a giant strike, but can prove to be a good thing. After 10 years anniversary of the Asian Financial Crisis, it has finally challenged the U.S. economic system. The revision of American Laws and Regulations in order to protect consumers and normalize competition was really urgent; Information recovering to improve the safety of a vigorous financial system is necessary as well. Many low and middle class Americans and Economists are expecting that Obama will be able to make their dreams come true and would bring a rise in the U.S. Economy (Plan to Stimulate Urban Prosperity, 2008) Changing should not only be a slogan. References Bureau of Economic Analysis. (2006) Personal Income and Outlays. Retrieved May 21, from http://www.bea.gov/bea/dn/home/personalincome.htm Bilek, M. (2006, April 27). Trends: April 2006. Automotive. Retrieved May 21, 2006, from http://auto.consumerguide.com/articles/index.cfm/act/trendarticles/article/TA_APRIL_06.html Forrester. (2006). Helping Business Thrive On Technology Change. Retrieved May 21, 2006, from http://www.forrester.com/my/1,,1-0,FF.html Funk & Wagnalls® New Encyclopedia. (2005), Retrieved May 18, 2006, from http://www.historychannel.com Goldstein, S. (2006). Home Depot, Time Warner Lift Futures: Fed minutes due later; crude oil futures higher. Retrieved April 16, 2006 from Oracle, Industry Overview, Retrieved May 15, 2006, from http://www.siebel.com/automotive-         crm/industry-overview.shtm Omi, Michael. (2006) “In Living Color: Race and American Culture”. Signs of Life In TheUSA. Boston, Massachusetts. Bedford/St. Martin’s. 549-560. “Plan to Stimulate Urban Prosperity.” (2008) Obama ‘08 11 Nov. http://origin.barackobama.com/issues/urban_policy/>. Porter, E. & Bajaj, V. (2006), January 28). U.S. Economy Slowed Sharply at End of 2005. New York Times. 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(1993), ‘Financial Markets in Transition: Or the Decline of Commercial Banking’, in Changing Capital Markets: Implications for Monetary Policy, Federal Reserve Bank of Kansas City, pp. 5-62. http://www.apra.gov.au/ as viewed on 16/05/2006 (Australian Prudential Regulation Authority-APRA). http://www.national.com.au/ as viewed on 11/05/2006. http://www.commonwealthbank.com.au/ as viewed on 11/05/2006. Vardy, N. (2008) The Global Financial Crisis Of 2008. Retrieved October 28th, 2008 from http://www.tzsy.cn/english/news/international Read More