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Macroeconomics Final Project Report

By ColoradoChic Sep 26, 2011 1082 Words
Colorado State University Global Campus
Macroeconomics Final Project week 8 Econ 400

The first thing we learn in our macroeconomic class is that people face trade offs. It is hard to gage which trade off is better for us as a whole, when economists and politicians are split between both positive and normative, in that they feel they know what will “fix’ the issue at hand, to the best of their judgments and understanding of the economy and its current state. The economic recovery as of today is questionable at best, and many fear that a double dip recession is in the works. I read many articles on the state of our economy and its growth and learned that many indicators are showing we are not doing that entire great. Growth in the first half of the year ended up being much lower and slower than was originally predicted, and in turn the prediction for the full year has been shown in a smaller number, this according to “ Laura D’ Andrea Tyson” an economics professor at the University of California, Berkeley. Along with other indicators, consumer confidence is looking like a sad faced puppy needing a good rub down. In the article, “U.S Consumer Confidence Falls to Lowest Level Since April 2009”, we find that according to the author, “ the consumer confidence index fell to 44.5 in August from 59.0 (Daily FX, 2011)”. This means that ultimately consumers are afraid to spend their money and are keeping a tighter hold on what they earn by not spending. The lack of spending ultimately affects the economy as the loss of profits to firm’s leads to stock pricing panic. A retail sales increase would be a good push that would help get production up, thus leading to an upswing of other things such as materials and ultimately manufacturing. However, consumer confidence isn’t the only indicator that our economy isn’t on a significant “expansion”, a few articles I read showed the sad progression in job growth, and employment isn’t anywhere near where it should be. As of today, according to the U.S. Department of Labor and Statistics, the unemployment rate is at 9.1 percent, as compared to August of 2007, in which the “ the number of unemployed and the unemployment rate held at 7.1 and million and 4.6 percent perceptively (Bureau of Labor Statistics, 2007)”. According to this data, this is more than double digit losses. Here in Colorado as of July, our unemployment rate is 8.5 percent, slightly lower than the national average, however still very high for the mass amounts of people in the labor force. Another indicator of the state of our economy is the drop in our credit rating. We have been up until August 5th of this month, had a stellar credit rating thus enabling us to show the world that we have strong staying power in our markets. Unfortunately, “S&P’s rational for the downgrade was its view that the recently negotiated budget agreement fell short of what’s needed to stabilize rising U.S debt levels (Swab, 2011)”. If we must look at the flip side of this, S&P is not the only credit rating organization who is watching us, others such as Moody’s Investors and Fitch Ratings still feel that we are a power house who can indeed pay their debt. One indicator that always makes the US population feel better about our economy is new home sales. However, new home sales are not making a big impact either. According to The US Census Bureau and the US Department of Housing and Urban Development, in a release that was issued on August 23rd of this month, “sales of new single-family houses in July were at a seasonally adjusted annual rate of 298,000, this is 0.7 percent below the revised June Rate, but is 6.8 percent above the July 2010 estimate of 279,000”. In other words we have a minimal increase from the past month until now, but as to a year ago, we are still not making any real progress and homes are not selling enough to make a big impact. It is uncertain what the near future holds. In an article I read called “Markets settle down….but problems are far from over”, it stated that, markets settle just a little bit, given some sense of calm. However, it is quoted as saying the “OECD has confirmed that growth in the worlds main industrialized nations had slowed for the fourth quarter in a row” Pound Sterling Forecast, 2011)”. This is bad new, and means that growth in the “global” economy as a whole is slowing down. All we can do it hope for the best policy to come out of the Fed and our President Barrack Obama. Whether or not the Fed should change interest rates in order to fight inflation, or even by how much if any at all, is a question that is in the hands of Ben Bernanke, our Fed Chairman. Mr. Bernanke is under mass amounts of stress as it is being stated from everywhere in almost every article that I read for this project, that things are just not looking good, and we are indeed nowhere where we should be

Reference:

Cooper, S., & Filepek, E. US Census Bureau , US Department of Urban Housing and Development. (2011). New residential sales in July 2011 (CB11-142). Washington, DC: Retrieved from http://www.census.gov/const/newressales.pdf

Jones, K. (2011, August 11). Us credit rating downgrade-what does it mean?. Retrieved from http://www.schwab.com/public/schwab/research_strategies/market_insight/todays_market/economy/debt_ceiling_and_the_us_dollar.html

Miller, J., & Wicks-Lim, J. (2011). Unemployment: a job deficit or a skills deficit? (Some political figures are claiming that the jobs people are looking for are in fact there, but people do not have the skills to fill them.), Retrieved from http://www.dollarsandsense.org/archives/2011/0111millerwickslim.html

Tyson, L. (2011). Recovering from a balance-sheet recession (The economy is showing signs in all markets, that the recovering isn't coming anytime soon.), Retrieved from http://economix.blogs.nytimes.com/2011/08/26/recovering-from-a-balance-sheet-recession/?ref=economy

Wolfers, J. (2011, June 22). Freakonomics. The feds wishful thinking (and wrong thinking) about unemployment, Retrieved from http://www.freakonomics.com/2011/06/22/the-feds-wishful-and-wrong-thinking-about-unemployment/

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