Export Grants

Archive for the ‘US Economy’ Category

The US economy got a jump in the first quarter of the year posting a 3.2% annualized increase over the year before fueled by the economies continued recovery. However this is slower then the 5.2% shown the year before partly because of lower government spending and a fall in exports. Exports only grew by 5.8% in the first three months of the year which is far less then the 22.8% that was experiences at the end of last year. This may not prove to be good for Obama’s initiative to revitalize the nations Export growth as he plans to double the exports over the next 5 years.

Strong spending by consumers helped to offset these drops with a 4% increase in spending has been reported versus the year before. Obama recently said:

We are moving in the right direction and this is an important milepost on the road to recovery.

The Federal Reserve has signaled that interest rates will not rise until the economy begins to show concrete signs of recovery. Short-term interest rates will remain low for an “extended period” of time according to the Fed and outside ovbservers say that this means at least a six month delay in any hikes targetted for the fall between September and November.

The Fed tried to downlplay these numbers, releasing the minutes from their March 16th meeting pleding that this “extended period” is contingent on the evolution of the economy rather then a set amount of time. This could mean that rates could rise sooner or later if conditions warrent it. This is the usual language given by the Fed as it doesnt want to surprise global markets or give them guarantees about it either.

Economists still believe that the economic recovery remains very fagile. Housing markets are still dependant on government support and one in ten americans are still out of work. Incomes have not been growing so businesses are loath to hire more or risk investing to expand their capacity and these factors require that interest rates remain low expecially when there are no substantial inflationary pressures eroding the dollars purchasing power.

Finally after months of huge job losses, the U.S. economy got a welcome bost with 162,000 jobs added in March. Despite a large portion of these jobs being temporary workers hired by the Census Bureau the private sector itself added 123,000 jobs last month which was much high then analysts had predicted. Even though all these numbers were added, the overall unemployment rate of the country remained unchanged at 9.7. This is because despite the huge job gains, the economy needs to create at least 125,000 in order to keep pace with natural population growth.

There is still a long road ahead before recovery can gain a solid foothold. The country has lost over 8 million jobs during a two year period and compared to that number, the recent news is just a drop in the bucket. At the current rate it would still take over give years before we were able to consider the effects of the recession erased. Manufacturing added over 17,000 jobs for the third monthi n a row led by fabrication industries. Temporary-help in the private sector added 40,000 jobs in march a well. However the financial services and information technology industries both lost jobs in march. Health care, education and retail all had growth. One of the most promising signs is the consturction sector which finally had positive growth after many months of job losses adding 5,000. Many are counting on the construction industry to be the leader in job growth once the housing market is able to recover.

Obama was careful in his words praising the numbers calling it a “significat milestone”:

We are beginning to turn the corner, This month more Americans woke up, got dressed and headed to work in an office or factory or storefront. More folks are feeling the sense of pride and satisfaction that comes with a hard-earned and well-deserved paycheck at the end of a long week of work.

There are Thirteen states that are still posting double digit unemployment rates including: Florida, California and the District of Columbia and Illinois. Many companies have reported willingness to expand their payroles, however they want to wait until later in the year when there are more signs of a recovery to the overall recovery before they are willing to risk bringing on more help. When demand dropped off at the beginning of 2009 many industries want to see consumer spending rise significantly before investing.

The current democratic administration has proposed doubling of the exports from the United states in five years with the stated goal of creating over two million jobs and boosting the sagging economy. Former Treasury employees have lauded these moves however realistically speaking it will be near impossible considering the partisan bickering currently holding up congress. Even if congress was willing to push through major legislation to ramp up job creation the short five year time frame would be near impossible.

Exports have double inside of two or three year period in the past, but only a handful of times since the end of World War II so this is not a very frequent phenomena. When it did happen it was during times of rapid inflation such as after the oil crisis of the 1970s. If inflation is taken into account such a huge jump has never occurred in this nations history, and at the moment interest rates are so low that inflation has been stagnant since the beginning of the recession so there will not be any help to the natural increase in the value of goods.

Many of the proposals that the Obama administration has put into place also seem better on paper then they will pan out in reality. Taxing multinational corporations that send jobs overseas will only lead to a vast exodus of jobs from our country as these companies which are often the major driver for economic growth will take their jobs elsewhere. This has been a common talking point among politicians but the reality is much more complicated. Other ideas have already fallen flat. The “Buy American” policy has already drawn anger from many countries from around the world due to its protectionist import connotations, which also flies in the face of the free trade goals that every country “seems” to support.

Currently health care is still front and center for the president, but hopefully once this has been either moved through congress or given up on we are not likley to see any debate on what we can do to improve our numbers. During the last few years the trade deficit with our trading partners has narrowed, but we are yet to close or surpass them. After all, a doubling of our exports will not help out the economy much if our imports have tripled during the same period of time.

In December 2009, the U.S. trade deficit jumped to $40.2 billion dollars an increase of over 10 percent. This figure represented a far higher number then the $36 billion that was expected by many economists. Despite this increase the overall trade deficit or $370 billion, which is a sharp drop from the 2008 number which was close over half a trillion dollars.

During the same December period exports were actually up over 3%, however imports continued to grow at a faster 4% rate.