The United States Economy: The Slow Recovery of a Nation

The recession of 2008 is also called the ‘Great Recession’, said to have begun in December 2007, and took a turn for the worse in September 2008, and it was a severe economic problem expanded globally. This recession affected the world economy, and is said to have been the worst financial disaster since the Great Depression. The decline in the Dow Jones this time was -53.8%. Since the official start of the recession in December 2007, and through June 2010 there have been about 2.3 million homes foreclosed in the United States. In 2012, the state with the most foreclosures in January alone was California, with 51,584 houses being repossessed. Unemployment during this collapse was 8.5%, and continued to increase to about 10% as of 2010. People’s reaction to this recession was a huge decrease in spending and borrowing from banks, but an increase in saving.

The United States economy is racing ahead at dangerous speeds, and it may be too late to prevent the return of widespread inflation. Ideally the economy should move ahead gradually and grow at a steady manageable rate. Mae West once stated “Too much of a good thing can be wonderful” and it seems the U.S. Treasury Secretary agrees. The Secretary announced that due to our increasing surplus and booming economy, instead of having an outsized tax cut, we should use the surplus to further pay down the national debt. A tax cut, though most Americans would favor it initially, would prove counter productive. Cutting taxes would over stimulate an already raging economy, and enhance the possibilities of an

Because of this high interest rate, the householder cannot afford the house, most of people start selling their house, the housing market start collapse. In 2008 and 2009, the US. Labor market loss 8.4 million jobs, or 6.1% of all payroll employment. This was the most dramatic employment contraction of any recession since the Great Depression. For the worker during the Great Recession, loss their job means that family incomes have dropped, adults as well as children have lost health

     The United States economy is slowly creeping towards a recession. The stock market has shown repeated drops. Consumers are not purchasing and even savings and loans are down for fear of a huge economic crash. The only bright spot is a housing market that refuses to yield as apparently consumers are still positive enough to purchase houses.

With the worsening economy on the forefront of most people’s minds, it is quite obvious that the strategy for turning this depression around needs to be changed. The effort and massive amount of money that has been used in attempt to stimulate the market has resulted in only temporary fixes. To cure the actual problem rather than treat just the symptoms, an out-of-the-box solution is clearly required.

Overall the U.S economy faced challenges due to budget cuts, taxes, and spending cuts. Policy changes marked sluggish growth followed by a strong finish in 2014 therefore 2015 should have a stronger economic outcome.

In December of 2007 the Great Recession hit not only the american but the world’s economy. According to the U.S. National Bureau of Economic Research (NBER) the struggle didn’t end in the United States until June 2009, and therefore had a duration of about 18 months. This global crisis “ranks fourth in terms of the weighted sum of countries suffering it” (NBER). Consumers, who had been the engine of the economy for the past several decades, suffered the loss of their jobs. Between 2008 and 2009, “the U.S. labor market lost 8.4 million jobs, or 6.1% of all payroll employment” (State of Working America). This resulted in “the most sever consumer spending decline since World War II” and the worst employment contraction since the Great Depression, reaching a peak of 10% of all the workforce on October 2009 (BLS). The economy was already faltering in the banking sector, but it finally crashed with the dearth of credit. As a heart distributes the blood throughout the human body, even reaching the limbs, allowing the body to work properly, the banking sector “pumps” credit, reaching every business in every sector. When the banking sector stops giving credit, the whole economy freezes since businesses don’t have means to pay their bills. There are reasons why the banks stopped the flow of credit, and they could have been avoided if the government had corrected the bad manners to which the banking sector was getting used, all driven by the ambition to generate more revenue. The

Real economic growth is defined as, “the rate at which a nation 's Gross Domestic product changes or grows from one year to another.” (“Real Economic Growth Rate”). In the U.S, GDP growth rate is currently 1.6%, compared to 1965, when it was 6.5% (Amadeo). Total Factory Productivity, or development of business processes and technological growth, is another measure of economic growth. The average TFP from 1891-1972 was 2.33, where the average TFP today is 1.33 (Matthews). It is apparent that the U.S. economy is not growing the way it once did. There are many reasons it is not doing well, and cannot grow how it used to. These include decreased productivity in the workforce, no new technology, limits on

The real economy began to exhibit problems related to the financial crisis as early as March 2006, when investment expenditure on residential structures began to decline. In early 2008, this decline spread to investment in business equipment and consumer spending on durable goods. It wasn’t until the summer of 2008 that consumer spending broadly and GDP began falling, signs of a recession. (In December 2008, the National Bureau of Economic Research, official arbiter of business cycles dated the formal beginning of the recession as December 2007.) While the public had been concerned about recession for much of the year, it wasn’t until the fall that the economy began to decline at more than a 6% annual rate. Congress responded by passing the TARP plan to assist failing financial institutions. This plan was meant to decrease the severity of the recession by treating its cause: the financial crisis.

The United States saw a recession starting in September of 2008. However, the event was not without warning. As early as 2006, there were signs of a drop in the housing market. The October new home permits were over a 25% less than the previous year. Prices were falling in 2006 and there were mortgage issues arising because of it. Come 2007, individuals became aware of banks having a problem with liquidity and were accepting subprime mortgages as collateral. At the end of the year, though, it seemed as if the Dow Jones Industrial Average, which would later trigger the recession, was almost near its peak. So, naturally, everyone ignored it.

The financial crisis that began in August 2007 has been the most severe of the post-World War II era and, possibly--once one takes into account the global scope of the crisis, its broad effects on a range of markets and institutions, and the number of systemically critical financial institutions that failed or came close to failure--the worst in modern history. Although forceful responses by policymakers around the world avoided an utter collapse of the global financial system in the fall of 2008, the crisis was nevertheless sufficiently intense to spark a deep global recession from which we are only now beginning to recover. Figure 1 shows the Recession periods in United States

The 2008 so called “Great Recession” was a time that was tough on a great deal of americans as well as people all around of the world. The shock was the popping of the housing bubble. After the great burst, the financial situation of the country began to spiral out of control. Unemployment skyrocketed. Millions of Americans were laid off. The inflation rate plummeted to an extremely unhealthy amount. This was strange because the United States had recently spent decades working to lower inflation rate. They finally received what they wanted and much more. The consumer price index also eventually crashed as well. A big reason for these crashes were civilian reactions to the bursted housing bubbles. The United States took several actions to recover from the crisis. They worked at lowering mortgage interest rates and also passed the American Recovery and Reinvestment Act. They also bailed out huge failing banks like AIG. We took many actions that eventually paid off and pulled us out of the recession.

The lack of response to low mortgage rates shows that no one industry or market will be able to stimulate economic growth, other industries and markets must join in. The labor market has taken initiative and has made changes, such as adding jobs to the economy in order to lower the unemployment rate. When the United States economy first went into its recession in the years 2008 and 2009, 7.4 million jobs were lost. Since then, there have been over 7.2 million jobs created, which is a 97 percent recovery of “employed persons” in the economy; furthermore, unemployment is at a five year low, sitting at 6.7 percent (Green). These changes in the labor market are crucial for success. Increasing employment throughout the United States, will increase household incomes dramatically. With this increase in household income, comes confidence which will guide consumers to spend the money they make in the economy, instead of saving it. During recessions, there is a sudden increase in savings which stop the flow of money in the economy. However, now the saving rate, the amount of income not spent but set aside, has continued to drop. In December 2013, the saving rate was 3.9 percent, a large decrease from 4.3 percent in November of that same year. The average rate for the entire year was 4.5 percent, the lowest saving

The U.S. economy is now facing four serious problems. The first problem is that consumers are cutting back on spending in an effort to try and repay their loans. “Presently, consumers and banks are trying to reduce the amount of money borrowed in relation to their assets or income, a process known as de-leveraging” (Francis, 2008). This will cause a recession since consumers make up seventy percent of all spending. The inventory of unsold homes is now large, so the demand for housing and construction will be low for several years. Other businesses will also begin to reduce the production of goods in order to keep pace with the decrease in demand. The International Monetary fund is forecasting the United States’ gross domestic product to grow by just .5% in 2008 and .6% in 2009. The problem of consumer spending is actually the least of the economy’s worries.

It has almost been a decade since the financially crisis of 2008 sent the United States and global economy on the edge of collapse. Even though the global economy didn’t collapse millions of people still lost their job, saving accounts, and homes. People all over the country were financially ruined and many will never be able to reacquire their lost money. After the dust had settled from the housing crises in 2008 the United States was able to rebound and strengthened its economy.