The US Economy Shows Signs of Slow down

When Fiscal Cliff was resolved, economists thought things would do well in the following quarter. In the month of April, the economy showed signs of falling. Economists are of the opinion that the economy is going to slow down this year as well. Though the economy might be performing, it is not upto expectations.

In January, the taxes were increased, sectors such as employment, housing grew strongly. The GDP is said have grown as high as 3% or even more (year to year). There was growth in employment in January and February at 208,000 but it came down to 88,000 in March 2013. Retail sales, construction of single family homes declined. The decline in housing sector is disturbing as the fundamental determinants have shown persistent growth. The slow down is likely to hit the over all performance of the economy.

According to this view, the reasons for the decline in economy in 2008 and later were the partly seasonal. It is said to be responded by adjusting the winter and summer data.

There is another opinion that large businesses hire primarily in the fourth quarter and small businesses hire in the second quarter of the year. Large firms have been healthier than small firms, in post-2009-recession scenario, and therefore are strong in the fourth quarter.

Still another opinion puts the economic slow down as because of bad luck that the economy experiences in the spring and summer. To strengthen the view, they give the examples of the first Greek bail out (May 2010), tsunami in Japan (March 2011). The Arab factor in petroleum price surge and America’s debt-ceiling too occurred around this time. In 2012, good weather brought in turn around in economy, while in summer the trend reversed. The argument that the slow down is because of misfortune is weak because, we are not clear when it comes issues as that surfaced in Cyprus.

The convincing point seems to be measures of austerity. Higher income tax on the rich and expiry of payroll tax cut led to a burden of $150 billion this year. Federal spending on all heads worth $85 billion has been cut down this financial year. These austerity measures resulted in slow down of the economy.

Despite differing opinions, on the performance of US economy, all of them are unanimous that there are clear signs of slow down. Given the size of the economy, in the current global economic scenario, any slow down in this economy is likely to hit other economies across the globe.