Current Macroeconomic Situation in the United States

The Current Macroeconomic Situation in the United States

As 2012 has come to an end, how are we, as an economy faring? What does a macroeconomic evaluation disclose, are we gaining speed, slowing or running in place? Are we ready to shift into high gear or will 2013 find us with more of the same we saw in the past year?

Macroeconomics is the study of the behavior of the economy as a whole. Using measures from national output or gross domestic product (GDP), national unemployment rates, inflation, consumer demand and disposable income economists try to forecast future economic conditions to help consumers, businesses and government agencies make better decisions.

That said, it is clear that while none of the aforementioned components of macroeconomic evaluation stands alone in individual impact, we can see the effects of some more than others and how such effects relate to the strength of the U.S. economy and the speed of its continued recovery.

Our economy today is simply not resilient enough. The damage from the Great Recession was substantial; and to date, the recovery has been disappointing. The real value of goods and services produced in the U.S. today is probably more than 5 percent below what economists call potential or the economy’s ability to produce goods and services without generating inflationary pressures. “The unemployment rate has been stuck at around 8 percent for nearly a year. That is well above the 5 percent to 6 percent level we would see if all of our resources were fully engaged.” (Leduc & Liu 2012) In the absence of further monetary stimulus or fiscal repair, the outlook could be for more of the same: moderate growth that is not strong enough to generate substantial improvement in the labor market; an unemployment rate that is likely to remain above its long-run level for a long time to come; and an economy that would be vulnerable to shocks at home and abroad.

There is research within the financial community that better and more accommodative monetary policies have the power to reverse these setbacks and raise employment, output and incomes. In other words, more accommodative policy can deliver a stronger economy and the resiliency. “Appropriate monetary policy can deliver such outcomes without generating inflation in the long-run that is much higher than desired by current Federal goals of 2 percent.” (Hammond, R., 2012) There is some demonstrated value to this line of thinking, however, with interest rates already at almost zero reasonable thought would have to include some consideration for where, exactly, or how, the new money would spur “new” economic growth. Particularly considering that the financial communities, i.e. banks, have still up to now been slow to respond with the lending necessary even given the current rates.

It appeared that the federal government may have helped bring the economic recovery to a