Current Economic Situation

U.S. Current Macroeconomic Situation:

Similar to the rest of the world, the macroeconomic conditions in the United States are currently fragile. This is mainly because the rate of unemployment is high though is slowly declining, the currency valuation is fluctuating up and down, and the European financial unrest has continued to have significant impacts on the nation’s economy. These conditions are coupled by a slow increase in manufacturing and upward trend of the stock markets. As a result of these macroeconomic conditions, there are huge speculations that the United States Federal Reserve will enforce more stimulus plans in attempts to boost the stalled recovery of the economy.

Macroeconomic Outlook for 2012:

The backbone of America’s economic recovery since the end of recent recession has been private consumption. The U.S. economy accelerated in the fourth quarter of 2011 and continued its slow recovery in the first quarter of this year after overcoming the negative effects from Japan’s natural disasters and the debt fiasco that occurred in early 2011. There are various indicators that show that the recovery continues to gain momentum such as the inching down of unemployment insurance claims and the increase in the average weekly hours in manufacturing. The other indicator of the gradual recovery of the economy is the fact that car sales are currently at pre-recession levels (“U.S. Quarterly Macroeconomic Review”, 2012).

However, the U.S. economic recovery is expected to remain volatile because of a combination of various domestic and external factors. In this case, the domestic factors are the three main sources of weakness i.e. financial contraction, lethargic demand for non-durables and services, and slow rise in construction of residential housing. On the contrary the external factors include the slowdown in emerging markets and the economic crisis in the euro zone.

While the unemployment rate remains high, it has declined or fell to 8.5...