The economy of the United States has been a land of mixed messages since the September 11th terrorist attacks, with seemingly wild swings in stock prices, but it remains to be seen whether that event will push us deeper into recession or be the impetus for recovery. Due to the unprecedented nature of the attacks, it's possible to find an expert to support virtually any conclusion a writer wishes to make. By taking a methodical look at the traditional goals and measures of an economy, hopefully we can understand where we currently are, and where we"re going. .
The three macroeconomic goals of low inflation, low unemployment, and high economic growth form the basis of our analysis.
The inflation rate is hovering in the 2.5% range at the moment. With consumer confidence at very low levels due to the terrorist attacks, consumers are spending less and saving more. The Fed has dropped interest rates 10 times in the last 11 months to spur the economy, with little success. The down side of this is that when confidence levels come back up, consumers are likely to spend some of that money they've been saving, forcing the Fed to quickly raise interest rates to prevent inflation from exploding. In short, inflation is at a tolerable level, but will bear close watching.
Unemployment has just been announced at 5.4% for October, the first time in 4 years that it's topped 5%. Many of the new jobless claims were announced as resulting from the attacks in September, but several reports have questioned whether they were inevitable, in light of dropping demand and increased inventories. As a result of the likely permanent changes in our country as it adjusts to being on the front lines of worldwide terrorism, many of these people may find themselves structurally unemployed. The final success of the competing "economic stimulus" packages currently making their way through Congress will surely be measured against the unemployment rate after they take effect.
