Risk to US economy worse than Great Recession


12 August AtoZForex, Lagos – There is a brewing crisis in the US economy that appears to be worse than the Great Recession. For some years now, there has been a record of 0.3 per cent increase in productivity and just 0.5 per cent in the last five years. This period of time, the US economy has toiled a lot in other to escape looming financial crisis and meltdown that was believed to have ended in the middle of 2009 economic year.

The outcome of the changes in productivity only indicated a rise in creation of Jobs with no simultaneous rise in salaries and wages, let alone an increase in standard of living creating a risk to US economy. This has been a secret in the US economy because there have always been a projection in growth breakout which in reality is ever yet to come.

No attention on the impending crisis

This is the opinion of Paul Ashworth, chief U.S. economist at Capital Economics. According to him, unfortunately, this impending crisis is getting little or no attention most especially among U.S presidential candidates. This has made productivity stagnant in the reality and in the long run doing more harm to the standard of living of Americans even more than that of the Great Recession if care isn’t taken.

Mr Ashworth said: “The longer this slump goes on, the harder it is to believe that the economy will just snap out of it. For all the talk of secular stagnation and permanently weak demand, it may be supply-side problems that are the bigger problem.”

Growth in wage has remained stagnant around 2 per cent or even lower for a while now ever since the pull out from last Recession. Meanwhile, stock market investors have something to fall back on positively, it has been a totally different ball game for a great number of the Labour force.

Inflation is on the rise positively?

To prove his point, he pointed that cost of labour per unit are close to 2.1 per cent over the past years, which gives the impression that inflation is on the rise positively, showing that there is disparity between wages and cost of labour. More so, there have been worries due to productivity rate, and the US economy is far from 3 per cent despite adding up GDP growth available all through the period of recovery. In fact GDP has been unable to breakthrough 2.5 per cent in any of the calendar year ever since the crisis began, which of course points to the fact that it is the worst recovery since Great Depression.

Potential growth is lower than what people think it to be because as it stands it is below 2 per cent growth rate.

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