Current State of Economy in the Us.

Economics Project USA

Current state of economy in the US.

        On assessing the current economic state of the United States, some factors will have to be used. Key among this would be the foreign direct investment, rate of unemployment and inflation. Foreign direct investment contributes to output growth, creates high paying employment opportunities for Americans, and generates exports for the U.S. Both developing and developed economies have realized the value of overseas investment, thereby resulting in a progressively more competitive global environment for FDI flows.  The U S welcomes foreign investors and provides them with an open and stable economy and is also the world’s leading beneficiary of FDI. Foreign investment benefits the U.S. economy in various ways; It creates new jobs, boosts wages, increases U.S. exports, strengthens U.S. manufacturing and services, brings in new skills, research and technology, and it also contributes to rising U.S. output.

U.S. Trends

        Most foreign investment in America comes from Organization for Economic Cooperation and Development (OECD) countries. In the year 2006, about 80% of these inflows came from Japan and Europe. The U K held the leading FDI point in the U S at $303 bn, accounting for 17% of all foreign investment in America, seconded by Japan at 12%, Germany 11%, Netherlands 11%, Canada 9 % and France 9%.11. It is central to identify the growing role of some emerging markets. Between the years 2002-2006, India’s FDI place grew by a multiple annual growth rate of 72 %. Others followed including Russia 64 %, Chile 54 %, South Korea 31 %, and Brazil 23%. Global Trends.

         Though, the United States of America continues to be the leading receiver of FDI inflows, it has lost important position globally. USA continues to draw large FDI inflows, though the proportion has declined from 31% of global FDI in the year 1980, to 13 % in 2006. This is due to the increased competition in FDI from the developed countries like China which has maximized on the Foreign Investment. The rate of unemployment in the US is currently  at 9.6% which is the highest ever experienced in the US economy. The increase in the unemployment rate was due to the increased labor force in the economy and mostly those who had been discouraged by the prevailing wage system had started looking for jobs.

Recession

        The recession period is characterized by a high rate of unemployment, as the consumption by the private individuals’ falls. The economy will not have enough money in circulation to pay for its workers and in return will have to lay-off some of them. For instance, in the US economy, during the recession period most individuals lose their jobs as the payroll is drastically reduced and furthermore the value of housing in the US economy dropped.  Also, most of investments in the stock market dropped in value making them fall below the par value. The real GDP for the economy will decrease on recession.  This can be attributed to the decrease in the investment and also consumption by the private individuals. For instance, the decrease in the investment will be brought about by the decrease in the rate of interest imposed by the economy. Moreover, as the GDP depends on imports and exports value in the economy, the decline in the exports value will make the value of the real GDP fall as the economy will be a net importer. Boom

        This is where the economy enjoys the favorable economic conditions. In such case, the rate of employment is high as the job opportunities are available with ease. The workers payroll is increased and thus they have a choice on their nature of consumption. This improves the employees’ standard of living in the economy. Under this condition, the real GDP increases, this is facilitated by the increased consumption by the private individuals, the rate of investment in the economy is increased due to increased interest rates, and also the economy experience a net export state, that is, exports being in excess of the imports.

The reason for the linkage between the level of productivity growth and living standard

        The productivity level in the US is the essential factor in the determination of the States living standard of the individuals, measured by the GDP per capita income. For instance, where there is faster level in the productivity growth will enhance an increase in the living standard of individuals. The level of productivity is measured by the quantity of goods also the services that a worker will have to produce on an hourly basis. The growth in the productivity level is linked to the standard of living of the US Citizens as they all have the same determinants. For instance, where an individual worker works in the production of a given goods and services and wants to maximize his/her wealth then the condition is to produce a large quantity of the products. This will facilitate both the increased living standard and also the productivity growth level will increase as more products have been produced. In essence, the income growth per annum will have to trail the productivity level. The annual rate of labor productivity has increased in the United States in the last decade, which is now at 2.2% from the past decade of 1.8%, due to the present economic expansion. The increase was facilitated by the increase in the per capita income of the economy which was due to the increased umber of working hours by individuals and also involvement of women in income generation in the past decade. The US government is strategizing in the increasing the level of production through education of individuals on relevant fields of study, have the necessary facilities in the production of the goods and also services, and be able to access and change to any technological advancement available.

Imports and exports of US

        The main trading partners in which the US trade with involves; China in which it imports approximately 15.4% of its total imports, Canada approximately 11.6% of the total imports per annum, Mexico approximately 9.1%, Japan 4.9% and Germany 3.7% of the total imports. Graphically the information can be presented as outlined below.

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        The US, on the one hand, imports most of its products from China and therefore, relies heavily on the Chinese markets, on the other hand, for the analysis of both exports and imports of the trading partners of the US will be based as follows as per the period of August 2010;

Totals                         USD (billions)

Canada                                44.29

China                                42.54

Mexico                        34.50

Japan                                15.69

Germany                        11.55

UK                                8.42

Korea, South                        7.62

Brazil                                 5.50

        From the above data, it is given that the major trading partner is Canada. The US, in the month of August 2010, had a total of USD 12.8 billion which was an inclusive of the imports involved. In essence, the major exporter is the Canada as it encourages the export of its goods and services in that the government provides incentives in the export of the goods and services, and the rate of taxation charged to export products is minimal. In the previous decade, the US has been a net exporter with the above countries being the major trading partners. For instance, the US variability in the export of the goods and services had been due to the over-reliance on the locally manufactured goods which are also locally consumed by the US citizens. The US export incentive is less compared to those of its trading partners.