Figure A Trillions of Current $ %Change GAP 2010 14. 958 3. 7 2011 15. 533 3. 8 2012 16. 244 . 6 Figure A, taken from the Bureau of Economic Analysis (SEA), shows there is a trend of moderate growth (??3%) in GAP. However, the current trend starts around the 2nd quarter of 2009. From SQ 2009 – SQ 2013 the annual growth rate is about 2. 2% (BEA). This rate of growth explains our current unemployment level and labor market. In order for the unemployment percentage to fall significantly there must be a high growth rate in GAP.
Figure B In Figure B, we can see that the unemployment rate has not returned to pre- recession levels, but it has declined and this supports the previous thought in which here is a negative correlation between the unemployment rate and GAP growth rate. The Bureau of Labor Statistics (BLISS) estimates the unemployment rate for October 2013 was 7. 3%. This is the lowest unemployment rate since December 2008, which many experts, including the BLISS, consider to be a point of significant downturn during the recession.
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From 2007-2009 the construction (13. 7%) and manufacturing (10%) industries experienced their largest employment declines since WI (BLISS). However, during that same period, employment in education and health services increased by about Macroeconomics and Selected Trends By Juvenile more health services. Also, according to the National Center for Educations Statistics, a relatively higher percentage of students graduated high school and about 68% went on to secondary education, which may have led to increased hires in education.
On the same token, when the US GAP began its moderate increase in 2011 the manufacturing industry real value, which is defined as “a measure of an industry contribution to GAP,” increased 2. 5% and then 6. 2% in 2012 (SEA). The real value of durable-goods manufacturing increased 9. 1% in 2012, 6. 8% in 2011, and 13. 3 % in 2010. Durable-goods manufacturing is often an important indicator of GAP and is also used “as a sign of business demand as a whole.
Capital goods [a type of durable good] represent the higher-cost capital upgrades a company can make, and signals confidence in business conditions, which could lead to increased sales further up the supply chain… ” (Barnes). As defined by the BLISS, the “Consumer Price Indexes (ICP) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. ” Essentially, the ICP measures inflation and adjusts the cost-of-living on a monthly basis.
The Federal Open Market Committee (FOMCL), which is part of the Federal Reserve System, acknowledges that “the inflation rate over the longer run is primarily determined by monetary policy… [and] that inflation at the rate of 2 percent, as measured by [ICP], is most consistent… With the Federal Reserves statutory mandate. ” From 2010-2012 the average increase was 2. 3% with 2011 having the highest annual increase at 3. 2% (3. 5% in 2nd half). The ICP table for the 2nd half of 2011 shows that the expenditure category with the largest percentage increase as motor fuel at a staggering 25. %. This may have been caused by a combination of turmoil in the Middle East, opposition of U. S. Foreign policy, and according to Josh Harvey, a contributor to Forbes, deregulation of the commodities market in 2000 (Deregulation increased speculative investments which may explain the volatility of gas prices starting in 2000 as seen in Figure C). Figure C Forwarding to the semi-annual ICP report for 2013, motor fuel is down 1. 9% from 2012. The first decline in inflation for motor fuel is seen in May of 2012.
People with ore liberal political philosophies believe this to be an effect of President Beam’s “crackdown on oil speculation” during mid-April, whereas the more conservative side claims this to be an artificial manipulation of prices (Lever). Government expenditure and the national debt seem to be covered by the media on a daily basis yet most Americans are not aware of this alarming problem. Some prominent economists, such as Paul Grumman, think our government expenditures are not as alarming as they seem. According to Grumman, “the ratio of government spending to GAP always rises during recession… Cause GAP is down. ” He also states that nearly half the rise in spending can be attributed to unemployment benefits as people turn toward aid programs when they lose their Jobs. Figure D Benefits per Person ($) Total Costs in Millions 2008 102. 19 37,642. 04 2009 125. 31 53,621. 49 133. 79 68,313. 15 133. 85 75,711. 83 133. 41 78,435. 92 1. 1 1. 2 nutritional education, and training programs. However, SNAP is merely a part of the Safety Net Programs which only account for 12% of the annual budget, as seen in Figure D 1. 2.
Defense spending, Social Security, and Medicare/Medicaid spending embodied make up for 62% of total government expenditures. With government 1. 3 Figure 1. 4 shows that spending in the larger governmental departments has increased from 2008, but has stayed steady from 2009-2012. Yet our debt total in 2012 rose ??1. 5 trillion dollars from 2011 and ??4 trillion since 2009. This is due to our record setting deficits since 2009 and interest on our debt. According to the White House Historical Tables, the budgets from 2009-2012 had astounding deficits; each at over a trillions dollars.
This marked the first time in history that a federal deficit cached a trillion dollars. The accumulation of deficits since the year 2000 have led to a 17 trillion dollar debt and interest payments that are equivalent to what we are spending on Medicaid annually. With costs in Health Services and Social Security expected to rise faster than GAP not only will government expenditures account for a larger portion of the GAP, but total debt will also rise as a result of continuous deficits. From 2009-2012 total debt has increased by 1 1. 3% per year on average.
Although from 2009-2011 the percentage growth of debt shrunk each year it did not top debt as a percentage of GAP from passing 100% in 2012. However, this 106% debt-to-GAP ratio includes Intergovernmental Holdings which is essentially debt that the Federal government owes itself (MIFF. Org). The current public debt-to-GAP ratio is at 73. 6% and therefore has not begun to constrain annual real growth, which has a threshold of 77% (CIA. Gob). The housing market has begun to revive and actually drove the GAP and consumer spending over the last few quarters.