; the Curent Macroeconomy
THE CURRENT MACROECONOMIC SITUATION
The current economic data suggest that the U.S. economy is expanding at a moderate pace, although the recovery from the recession and financial crisis still promises to be long and difficult.
Real GDP grew by 3.0 percent in the fourth quarter of 2011, up from 1.8 percent in the third quarter. Roughly two-thirds of that increase, however, was due to business inventory restocking, a temporary boost to GDP that will not be sustained in the coming quarters. The economy grew by a sluggish 1.7 percent in 2011 and the Blue Chip consensus of private-sector forecasters sees GDP rising by just 2.2 percent in 2012. The Federal Reserve has characterized the current economic recovery as `uneven and modest by historical standards.'
Total payroll employment rose by 227,000 in February. Recent monthly job gains have been encouraging, though at this pace it would still take until the end of the decade to return to a pre-recession level of unemployment.
The unemployment rate remained at a three-year low of 8.3 percent in February. Still, a broader gauge of under-employment, which includes people who have stopped looking for work or who can't find full-time jobs, is still over 15 percent. In addition, the long-term unemployment remains near record levels as the share of the unemployed population who have been out of work for six months or more is 43 percent.
The housing market remains a key drag on growth. Housing prices have yet to fully bottom out and have showed some renewed signs of decline in parts of the country. The ratio of home equity to income is at an all-time low--a measure of the enormous amount of housing wealth that has been lost due to the drop in home prices. As households feel less wealthy, they are less likely to spend, which puts a damper on the overall economy.
Average U.S. gasoline prices have risen 15 percent so far this year as geopolitical tensions in the Middle East have contributed to a sharp increase in oil
The current economic data suggest that the U.S. economy is expanding at a moderate pace, although the recovery from the recession and financial crisis still promises to be long and difficult.
Real GDP grew by 3.0 percent in the fourth quarter of 2011, up from 1.8 percent in the third quarter. Roughly two-thirds of that increase, however, was due to business inventory restocking, a temporary boost to GDP that will not be sustained in the coming quarters. The economy grew by a sluggish 1.7 percent in 2011 and the Blue Chip consensus of private-sector forecasters sees GDP rising by just 2.2 percent in 2012. The Federal Reserve has characterized the current economic recovery as `uneven and modest by historical standards.'
Total payroll employment rose by 227,000 in February. Recent monthly job gains have been encouraging, though at this pace it would still take until the end of the decade to return to a pre-recession level of unemployment.
The unemployment rate remained at a three-year low of 8.3 percent in February. Still, a broader gauge of under-employment, which includes people who have stopped looking for work or who can't find full-time jobs, is still over 15 percent. In addition, the long-term unemployment remains near record levels as the share of the unemployed population who have been out of work for six months or more is 43 percent.
The housing market remains a key drag on growth. Housing prices have yet to fully bottom out and have showed some renewed signs of decline in parts of the country. The ratio of home equity to income is at an all-time low--a measure of the enormous amount of housing wealth that has been lost due to the drop in home prices. As households feel less wealthy, they are less likely to spend, which puts a damper on the overall economy.
Average U.S. gasoline prices have risen 15 percent so far this year as geopolitical tensions in the Middle East have contributed to a sharp increase in oil