International Trade: Is Our Economy Starting to Recover?

1042 words | 4 page(s)

Between 2008 and 2011, the United States faced one of the most serious economic crises in its history. The collapse of the housing market, followed by the subsequent failures in all spheres of the economic and social life in the U.S., became a tragic macroeconomic lesson to the whole world. Now, the main question is whether the American economy is showing any signs of recovery. It would be fair to say that the symptoms of recovery are highly uneven across various economic sectors. While the housing market displays promising growth trends, unemployment is still high. GDP growth rates slowly increase, but consumer confidence is at all times low. Changes in trade balance do not tell anything about the economic recovery, as the United States has been facing trade deficits since the beginning of the 1980s. It is possible to say that trade balance is not a reliable measure of economic recovery, due to the numerous factors that impact its absolute meaning.

The past years became a new period of economic struggles for the United States. Since 2008 and until present, the country has been trying to revive its economy and restore its macroeconomic stability. As of today, the signs of recovery are evident but highly uneven across various sectors of the economy. As such, it is still too early to say that the U.S. economy is starting to recover. The most promising have been the recent changes in the U.S. housing market, where prices have climbed (Dexheimer). Dexheimer suggests that the limited number of properties in the market boosts unprecedented competition for affordable homes. In the second quarter of 2013, 142 out of 163 metropolitan areas in the U.S. witnessed an increase in median transaction prices (Dexheimer). According to Dexheimer, positive changes in the housing market should be attributed to the considerable improvements in employment. Unfortunately, these assumptions are highly misleading, as the rates of unemployment in the U.S. are still high.

puzzles puzzles
Your 20% discount here.

Use your promo and get a custom paper on
"International Trade: Is Our Economy Starting to Recover?".

Order Now
Promocode: custom20

The U.S. government has been quite successful in alleviating the burden of unemployment. In the second quarter of 2013, the rates of unemployment fell to 7.3 percent – the lowest level in the last four years (Rushe). Nonetheless, the pace of job creation is disturbingly low: in July, only 169,000 new jobs were created (Rushe). The number of those who had been unemployed for more than a year did not change at 4.3 million (Rushe). No less serious is the situation with teenage unemployment, as teenagers make up 22.7 percent of all unemployed in the U.S. (Rushe). Slight improvements in the employment situation are offset by the negative shifts in average U.S. wages – economists do not expect real wages to grow more than 1 percent by 2014 (Smith).

At the background of the gruesome employment situation, inflation and GDP growth indicators look promising. Inflation grew modestly in September, with Consumer Price Index facing a 0.2 percent increase (Wilking). Since the last September, consumer prices in the United States had grown only 1.2 percent, thus creating a picture of relative stability in the economy. GDP grew 2.8 percent in the third quarter of 2013 compared with 2.7 percent in the second quarter (Stewart). The rates of GDP growth were higher than expected, and the Federal Reserve has all chances to start its quantitative easing program before January (Stewart). Yet, again, despite the relative stability of prices and promising shifts in GDP, consumer confidence remains at all times low. American consumers do not believe in fast economic recovery. The consumer confidence index in October reached its lowest meaning in the last seven months (Rugaber). The main difficulty facing consumers is poor employment prospects: expectations for hiring keep falling, while sustained disgust with political decisions, politicians, and government policies keeps consumer confidence low (Rugaber). Therefore, it is still too early to say that the American economy is recovering.

A common perception is that trade balance could serve as a reliable indicator of economic growth or decline. However, this perception is not supported by facts. On the one hand, trade balance is heavily impacted by the factors that lie beyond the scope of the U.S.’s influence. These factors include but are not limited to business cycles, the state of foreign economies, and currency exchange (Baumohl 242). Differences in how various economies are growing can have profound implications for countries’ trade balances (Baumohl 242). These factors render trade balance as an unreliable indicator of economic recovery. On the other hand, “the United States has been running consistent trade deficits since 1980 due to high imports of oil and consumer products” (Trading Economics). Consequently, slight shifts in the U.S. trade balance will hardly create a complete picture of macroeconomic wellbeing. Much more reliable are the traditional economic indicators, such as GDP growth rates and consumer price index. Economists could also shift their attention from unemployment rates to the rates of job creation, as it is job creation that speeds up the economic recovery and makes consumers more confident in their future economic expectations.

In conclusion, the results of the recent macroeconomic policies in various U.S. sectors are highly uneven. Housing prices are growing. GDP growth rates are increasing. Inflation is low. Unemployment is slowly declining. Yet, consumer confidence has reached its lowest levels over the last seven months, coupled with the low pace of job creation. Consumers experience disgust with government policies and political decisions. The existing trade balance deficit does not reflect the full picture of macroeconomic wellbeing in the United States. Today, economists should shift their attention from unemployment and GDP to the rates of job creation, because only new jobs can boost consumer confidence in the United States.

  • Baumhol, Bernard. The Secrets of Economic Indicators. FT Press, 2012. Print.
  • Dexheimer, Elizabeth. “Home Prices Climb in 87% of U.S. Cities amid Recovery.” Bloomberg, 8 Aug 2013. Web. 1 Dec 2013.
  • Rugaber, Cristopher S. “US Consumer Confidence Falls to 7-Month Low.” ABC News, 26 Nov 2013. Web. 1 Dec 2013.
  • Rushe, Dominic. “US Unemployment Rate Drops to 7.3% amid Sluggish Economic Recovery.” The Guardian, 6 Sept 2013. Web. 1 Dec 2013.
  • Smith, Yves. “Why the US Economy Won’t Fully Recover.” Naked Capitalism, 27 Aug 2013. Web. 1 Dec 2013.
  • Stewart, Heather. “Rise in US Economic Growth Brings Tapering Back into Focus.” The Guardian, 7 Nov 2013. Web. 1 Dec 2013.
  • Trading Economics. “United States Balance of Trade.” Trading Economics, 2013. Web. 1 Dec 2013.
  • Wilking, Rick. “U.S. Consumer Prices Rise, but Underlying Inflation Benign.” Reuters, 30 Oct 2013. Web. 1 Dec 2013.

puzzles puzzles
Attract Only the Top Grades

Have a team of vetted experts take you to the top, with professionally written papers in every area of study.

Order Now