The U.S. Economy: What's Going on Now?
Written By: Waqas Rafiq
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If you're trying to get an idea of what's going on with the economy, you need to look at many different aspects before you have a complete picture of what the U.S. economy looks like today, and where it may be headed in the future. At the most basic level, you should consider economic growth versus inflation and unemployment levels in order to get an idea of how successful (or unsuccessful) the Federal Reserve has been when they set monetary policy over the past year or so; and how likely (or unlikely) it is that they will change things up going forward into 2022 and beyond.
What is GDP
Gross domestic product (GDP) is the value of all final goods and services produced within a country in a given period of time. It's often used as a measure of a country's economic health. The U.S. Bureau of Economic Analysis (BEA) releases quarterly GDP estimates, which are closely watched by economists, businesses, and investors.
In the first quarter of 2020, GDP shrank by 4.8%, the largest drop since the Great Recession.
Current US GDP
According to the BEA, current US GDP is $19.39 trillion. That's a pretty big number, and it means that the US economy is doing well. However, there are some signs that things might not be as rosy as they seem. For one thing, GDP growth has been slowing down lately. In the first quarter of 2019, growth was just 2.2%. That's the slowest pace of growth since 2016. It should pick up again later in the year, but this slowdown in economic activity could have implications for jobs and wages.
In addition, Americans aren't saving as much money as they used to. The personal savings rate hit its lowest point in over fifty years last year. It was just 3%!
Another troubling sign is that wage growth has slowed significantly over the past few years. Today, average hourly earnings are up by only 1% annually--compared with around 3% back in 2007-2008 when we were coming out of the Great Recession. GDP decreased at an annual rate of 1.6 %.
Industrial Production – Understanding the Numbers
U.S. industrial production declined in September, according to the Federal Reserve, as manufacturing output fell for a second consecutive month amid ongoing challenges from a strong dollar and weak global requirements.
But while the headline number was disappointing, a closer look at the data reveals that not all sectors of manufacturing are in decline. In fact, some industries are actually doing quite well.
So what does this mean for the overall economy? Let's take a closer look at the numbers to find out.
Oil Prices
After years of stability, oil prices have been on the rise again. In the past year, the price of a barrel of crude oil has risen from $45 to over $70. This increase in price is due to a number of factors, including increased global demand, production cuts by OPEC, and political instability in key producing countries. While higher oil prices are good for producers, they can lead to inflation and higher fuel costs for consumers. The U.S. economy is currently enjoying low unemployment and strong growth, but rising oil prices could put a damper on things in the months ahead. The outlook forecasts retail gasoline prices in 2022 to average $4.05/gal, down just 2 cents from last month, and put retail diesel prices at an average of $4.73/gal, up 4 cents from last month.
Consumer Price Index (CPI) – How it Works
The CPI is a measure of the average change over time in the prices paid by consumers for a basket of goods and services. The CPI measures prices at the retail level, or what consumers pay, and thus is different from measures such as producer prices or wholesale prices. The CPI can be used to track inflation, which is defined as the increase in the cost of living over time. The CPI is released monthly by the Bureau of Labor Statistics (BLS).
Unemployment Rate
The unemployment rate is a measure of the number of people in the labor force who are looking for a job but cannot find one. The current unemployment rate is 7.0%. This means that there are 7.0% of people in the labor force who are looking for a job but cannot find one. The unemployment rate has been slowly decreasing since it peaked at 10.0% in October 2009.
The US unemployment rate was unchanged at 3.6 percent in May of 2022, the same as in the previous two months, remaining the lowest since February 2020 and compared with market expectations of 3.5 percent.
Inflation Rate – Measuring the Price Changes
The Consumer Price Index (CPI) is the most widely used measure of inflation. It is an index that tracks the prices of a basket of goods and services that are commonly purchased by households. The CPI is released monthly by the Bureau of Labor Statistics. The recent rise in the inflation rate, first observed in 2021, has surprised financial markets as well as monetary policymakers. In just one year, the annual inflation rate measured by the consumer price index (CPI) increased substantially from 1.4% in January 2021 to 7.5% in January 2022.
Trade Deficit/Surplus
The United States has been running a trade deficit for many years now. This means that we import more goods and services than we export. The trade deficit is the difference between what we spend on foreign goods and services and what foreigners spend on our goods and services. In 2018, the trade deficit was $621 billion. That means we imported $621 billion more than we exported. When imports exceed exports, this leads to an outflow of money from the country.
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