In-Depth Analysis of the Current USA Economic Situation - Case Study Example

Introduction Proper functioning of the economy of a country is vital for the achieving of the long-term goals and objectives of its population. The main areas of consideration in the economy include labor, capital, natural resources, and the entire process from the production of goods from the raw materials to the consumption by the consumers. In the economy, the major drivers are the demand and supply of goods and services, either within the country or outside its national boundaries. In the past, people used to undertake transaction using barter trade, but currently it is done by various mediums of exchange. The achievement of economic stability is not an easy task as it is usually influenced by internal and external factors. This paper seeks to give an in-depth analysis of the current USA economic situation taking into account analysis of labor, marketing, growth, and investing. Economy In the United States of America, numerous changes have been achieved in the economic system. In the year 2008, the recession threatened the economy which has since then been recovering until this year when the European region crises affected various economies across the globe. The reason for the impact to be felt in the United States of America is that there is not a single economy in the world that is entirely independent. This is mainly because economic activities, such as international trade, involve different countries which usually have differences in their economic capacity. In the achievement of the improved overall American economy, the following factors have played a significant part. (A).Technological Evolution It is evident that technological advancements have had great impact on the society, as well as the country as a whole. One of the biggest technological advancement made is the invention of computers and the internet. Through the internet, communication between various persons have been greatly improved which has generally affected the conduction of business transactions. Moreover, the internet provides a platform at which US traders can advertise and sell to various persons across the globe. This has been very rewarding and is evident in the ever-increasing number of organizations conducting both online and offline businesses, with a preference to online transactions. In the industrial sector, the technological advancement has led to the development of more efficient and high capacity machinery, which has significantly reduced the input costs and increased production. This directly translates to increased returns, which are currently achieved by many companies. The National security is very essential in ensuring that the economic activities run smoothly in the United States of America. In this regard, the technological advancement has ensured continuous improvement of the security system. This has helped to control various threats from our enemies, as no American citizen would wish to observe our economy being affected by terrorist activities, as in the case of September 11 attack. As for the consumers, technology has ensured that the products availed to them are fit for consumption and they have been provided with various means of payment, such as the use of debit card. (B). Geography The location of United States of America in the geographical map is good to its economic development. The country has a large stretch of it national boundary along the sea. This is equipped with numerous harbors, which have ensured that exports are made timely and effectively. In achieving this, improvements in the ports have been conducted in the twenty first century. A good example is the renovation conducted after the destruction caused by Katrina in 2005. (c). Social Organization The interaction between the American in their daily activities is very essential in the achievement of national success. Major revolutions in these issues were achieved in mid twentieth century with the passage of the Civic rights bill of 1964. Currently, the government has enforced laws that have ensured that discrimination by race, gender or skin color is eliminated. This has improved coordination between various workers, which has consequently improved work performance, and production. United States of America Economy The economy of the United States of America has been improving. This is contributed by good governance and cooperation between various people. In getting a clear understanding of the current situation of the country’s state of economy, the major economic indicators listed below are used. (A). Consumer Price Index This indicator takes into account the changes in price level of various household goods. This is achieved by taking into consideration the prices of the consumer goods and services taken and analyzed for a specific period. According to the report released on the consumer price index of the United States of America for the month of October 2011, a decrease of 0.1 percent was observed. This has a direct impact on the economy, as the consumers’ spending is a major contribution to economic development. During the last one year, an increase in the index of all items was observed (United States department of labor 1). The Arab uprising observed in some countries in northern Africa had an impact on our economy. A good example is the crises in Libya, which greatly affected the oil supply into many countries. This led to a rise in oil prices, which greatly increased manufacturing cost for many industries. Since the companies could not make the losses, the burden was transferred to the consumers in terms of increased prices. Since most of the resources available to the customers were directed towards settling this deficit, little was left in their hand for investment. Investment is necessary in ensuring that the future is more stable than today in terms of economic. The consumer price index usually communicates the inflation levels in a country that the investors use to estimate the total returns. This is very necessary in ensuring that the set goals and objectives are met. In the past years in United States of America, the consumer price index used to be entirely based on price comparison in two different periods, but as time has been evolving, it currently takes into account changes in cost. This has significantly reduced the error, which would be very bad for investors. In some instances, the CPI could be altered which would have negative effect on the economy. For example, if the CPI is manipulated downwards, then the effect of the investment made could be less rewarding. Therefore, in making the investment proper analysis of the CPI is necessary. For short-term investment, investors consider inflation effect in calculating their anticipated returns. This is conducted using the approximate method. On the other hand, a different approach to long-term investment is taken to minimize the errors. The government of United States of America uses the CPI value to set about its expenditure. For example, if the consumer price index of USA continues to rise, then the government will spend more resources in paying social securities and other expenses. This, thus, leaves the government with less resource to invest. The CPI is also very useful in the calculation of the gross domestic product of a country. In some cases, the consumer price index deflates some of the components used in the calculation of the GDP. In such instances, a lower inflation rate exaggerates the actual state of the economy. (B). Employment The number of employed persons forms the labor force, which is very essential in the achievement of set production goal. This form of labor is referred to as human labor. The persons are usually employed in all levels of production. Due to technological advancement, the labor for required by industries has declined with few operators left. This is in contrast to the earlier years where most of the company’s operations were not automated. According to the statistics released by the United States Bureau of labor statistics, the non-farm payroll record for October, 2011 increased. The private sector recorded a higher increase in the number of persons employed in comparison with the public sector. The estimated unemployed person in the United States of America rose by 0.2 percent to stand at 13.9 million. There is a cross correlation between the employment rate and the gross domestic product of a country. This is mainly because the gross domestic product refers to the market value of goods and services produced in a country. To increase the level of production of any goods or service, an increase in the input is necessary. Therefore, if a larger number of persons are employed, then larger production is manufactured. In the case of the United States of America, the number of unemployed people has been on the increase. This makes it harder for the local and international companies to obtain more profits. There have been various reasons for the current increase in the number of unemployed persons in the United States of America. Currently, very few new companies are being developed to trap the current available labor force. To the private developers, they have been arguing that the current environment is not suitable for investment. On the other hand, there has been an increase in the number of jobs exported abroad. This is mainly due to availability of cheaper labor in other countries. Since the companies wish to make more returns on their investment, they are opening branches in countries where the labor is available cheaply. By doing so, the companies increase their returns but leave the majority of the American labor force unemployed. This has been a big concern and has attracted attention from various stakeholders in the labor industry. In terms of investment, people usually invest on their surplus after taking care of basic needs. In the case when the majority is not employed, their resources to make the minor investments are limited. This translates to reduced minor investment. In the achievement of overall national economic prosperity, the contribution of the minority cannot be neglected. Therefore, taking into account our increasing number of unemployed persons, quick intervention between the government, private sector, non-governmental organizations, and other stakeholders is necessary in ensuring that the national economic goals are achieved. The growth of one sector of the economy can affect another sector, but this is dependent on the growth the employment and productivity intensity. It means that the growth of a sector does not automatically lead to the growth of other sectors. If employment intensive growth is to reduce the poverty levels of our country, then it should be directed into the most productive sectors. In the achievement of overall growth and development, quantitative and qualitative analysis on job creation, production and mobility is necessary in ensuring that the necessary strategies are identified and implemented. (c). Imports and Export price index The imports and export index indicates the rate of change in the prices of the imports and the exports of a country. In the United States of America, the import prices declined by 0.6 percent in October, as recorded by the United States department of Labor. On the other hand, the export prices declined by 2.1 percent to hit a record low lastly experienced during the 2008 recession. The decline in the exports communicates that the economy is not expanding. This could have been contributed by internal and external factors. An increase in exports indicates that the production has increased which provides more employment opportunities to the citizens. One of the main reasons for the decline in exports is the exportation of jobs abroad, which has led to American companies manufacturing their production in countries where cheap labor is available. In order to increase the exports, the government should implement strategies that would attract more investor in our country, which would not only be beneficial to the American citizens, but also to the government through taxation. (D). Productivity and cost In the United States of America, the data on productivity and cost is released quarterly. In the third quarter of this year, the released data indicated that an increase of 2.3 percent was obtained. In obtaining the labor productivity, a ratio of real output index to the hours worked by all persons is taken. This information is very useful in determining the economic growth of the country. As a result, it can be of great help in determining whether it is viable to make a long term or short-term investment. (E). Real Earnings According to the Statistics released by the United States Bureau of Labor Statistics, “real average hourly earnings for all employees rose 0.3 percent from September to October, seasonally adjusted”. This increase stems from a 0.2 percent increase in average hourly earnings and a 0.1 percent decline in the Consumer Price Index for All Urban Consumers (CPI-U)” (1). This is good for the economy, as the more people earn, the more they have for investment. Marketing is very important in ensuring that the product information is clearly availed to the customers. In the USA, the current means of advertisement include the use of television, radio, billboard, and through the internet. Advertising through the internet is preferred by many multinational companies as its cost is usually low. The advertisement varies in nature and content depending on the target group. Conclusion It is evident that the achievement of economic growth of the United States of America has not been an easy one, as it is affected by both internal and external factors. In order to understand the current state of economy in the USA, labor, marketing, growth, and investment, various indicators of economic growth such as real earning, productivity and cost, import and export price index, employment and consumer price index were considered in detail. Works Cited United States Department of Labor. Economic News Release: Consumer Price Index Summary. November 11, 2011. http://www.bls.gov/news.release/cpi.nr0.htm. United States Department of Labor. Economic News Release: Consumer Price Index Summary. November 11, 2011. http://www.bls.gov/news.release/realer.nr0.htm Read More