U.S Economy Status and Recession Comparative

U.S ECONOMY STATUS AND RECESSION COMPARATIVE 7

U.SEconomy Status and Recession Comparative

U.SEconomy Status and Recession Comparative

CurrentState of the U.S Economy

Thecurrent economy of the United States can be described using threemain variables. These variables are the level of employment andunemployment, the inflation level as they relate to the GrossDomestic Product, GDP. The discussion in this paper will evaluate thecurrent state of the U.S economy and determine that recession has notyet ended. By comparing the economic situation in another country,United Kingdom in terms of unemployment, inflation and recession,this paper will analyze the reasons for the similarities anddifferences between the two countries.

Unemploymentis currently, an issue facing the economic state of affairs of theU.S economy. Despite the creation of jobs in recent times, the rateof unemployment is a rate of 6.7% which is still high. Before therecession and the year 2008, the rate was held at rates lower rate,but the recession sparked the turnaround of unemployment levels (U.S.Bureau of Statistics, 2013). The problems of unemployment facing theUnited States economy started with the 2008 housing bubble that ledto the collapse of financial institutions. In addition, the economicsituation was consistent because of the reduced consumption. This ledto reduced trade volumes that reduced the demand for production,thereby reducing employment in the economy.

Byfocusing on the inflation, the current United States situation isbetter compared to earlier rates during recession. The recentinflation rate of 2.4% indicates that the economy has improved ascompared to the economic growth rates (U.S. Bureau of Statistics,2013). The economy is expected to record better balances betweeninflation and economic growth rates because of the expansionarymonetary policies. However, the economic situation prevailing todaydoes not seem to get the impact of the inflation because of thestability of the economic policies adopted to control inflationarypressures. Despite this, the economy is still under gradual recoveryfrom the economic recession of 2008.

TheEnding of the Recession

Theperiod of recession has ended, when viewed from the perspective ofthe economic variables of gross domestic product and inflation.However, the period of the indicators of recession has extended overtime since the economy has not fully recovered. The economicrecession of 2008 is deemed to have ended in mid 2009 (Grusky et al,2011). Even though the recession period is considered by manyeconomist commentators to be over, the effects of the recessionperiod have not ended. The current macroeconomic situation is in therecovery stage after the 2008 recession period. However, as evidencedby the current increasing house sales, steady increase in demand,reduced mortgage rates, the economy is gaining a gradual growth.

Accordingto the current economic situation, the economic variables ofemployment and inflation are still at the unhealthy levels. This isbecause of the effects of recession on the production and the demandlevels in the economy. According to the definition of recession, itis a temporary period of low economic performance as viewed in termsof real income, employment, whole-retail trade and industrialproduction (Grusky et al, 2011). The comparison of this end, however,does not go in congruence with the definition of low economicperformance. This is because the impacts of recession are close tothose of recession period, as seen in unemployment levels andinflation. However, in many countries, the recession continued to theend of the decade and the start of the new decade.

Comparisonwith the United Kingdom

Theeconomic performance of the United States has always had an impact onthe economic status of the whole world. However, most significantly,the western European countries like United Kingdom are highlyimpacted by the U.S economic changes, including recession. This makesthe economy of the United Kingdom to be interesting to preview whilecomparing with that of the United States. Moreover, the UnitedKingdom is the most relevant country in Europe to compare to the U.Sbecause of the historical economic relations between the twocountries.

Thetwo economies portray the similarities in the timing and the impactof the recession. The first similarity is that the recession startedin the year 2008 and ended in the same year, 2009. This is becausethe great recession affected almost all the countries that hadeconomic ties with the Western Europe and the United States. Thesecond similarity is that the recession was the greatest and deepestto both economies since the Second World War (Grusky et al, 2011).More importantly, the recession in the two countries affected thesame sectors of the economies. These sectors include the bankingsector, investment firms and industrial output.

However,there were differences in the way recession took place in the twocountries. First is that the low economic performance in the UnitedStates continued to be consistent, even after the official end of therecession. This means that the country experienced subsequentrecessions, even after the 2009 end of the great recession. Forinstance, in 2010, one year after the U.S recession ended, the UnitedKingdom experienced a 0.5% reduction in industrial output andunemployment rate rose to 8.1% in August 2011 (Weldon, D. (2012).This was the recession that was called the Double Dip Recession andtook place between Q4-2011 until Q2-2012.

Reasonsfor the Comparatives

Oneof the main reasons for the similarities in the way recessionimpacted on the two countries to be is the similarity of the economicstructures of the two countries. The two structures are similar inthe way the government intervenes in the economic programs of thecountries through similar macroeconomic policies. For instance, eachof the two economies has an optimum level of liberalization thatcontrols the economic units.

Atthe same time, the differences in the way the two economies appliedthe interventions to the recession differently and at differentmagnitudes. For instance, the UK government employed tighter fiscalpolicies more than the United States. The UK applied a 3% higherlevel of fiscal policy than the United States did to curb recession(Weldon, D. (2012). This policy had significant impact on theconsumption levels, leading to the differences in the recoveryperiod. One of the reasons is because the economy of the UK wasperceived to be hit harder by the recession than the US.

Conclusion

Recessionhit several countries with the United States being the mostsignificant economy due to its influence in the economy. The currentU.S economy is in the recovery stage with a consistently steadyunemployment and inflation levels despite the end of the recessionperiod. The U.K economy is the most closely related to the U.Seconomy due to the relations of the two countries. However, the U.Kexperienced a longer recession as well as successive periods of loweconomic performance that can be associated with the 2008-2009recession period.

References

Grusky,D.B.,Western,B., &amp Wimer,C.C. (2011). TheGreat Recession.NewYork:RussellSage FoundationU.S.Bureau of Statistics, 2014. EmploymentSituation Summary.RetrievedFrom, &lthttp://www.bls.gov/news.release/empsit.nr0.htm&gtSeptember11,2014Weldon,D. (2012). Comparehow the UK and USA recovered from recession.RetrievedFrom, &lthttp://liberalconspiracy.org/2012/03/29/compare-how-the-uk-and-usa-recovered-from-recession&gtSeptember11,2014