U.S. Economy 2010 Update
The unemployment statistics published by the Bureau of Labor Statistics indicate minor improvement from 9.7% in January 2010 to 9.0% in January 2011. The OECD says, “It is becoming increasingly clear that the economy has entered a soft patch, but this is not inconsistent with previous recoveries. We don’t see a risk of a double-dip recession. That said, we don’t see either a recovery that is strong enough to put a significant dent in unemployment.” The still lingering problem of unemployment is responsible for lower demand, reduced production, and overall, lesser-than-required growth. An example is the additional liquidity introduced into the financial during the recession, which failed to have the desired impact due to soft demand.
Another cause of worry for the U.S. is the galloping sovereign debt level, which is already touching 100% of the GDP. Unable to contain the situation, the Government is contemplating an increase in the sovereign debt ceiling $14.3 trillion. This will be the second revision in the last two years. Florida Senator Marco Rubio said, “Medicare and Social Security as they currently are structured, is unsustainable. They will bankrupt themselves and ultimately bankrupt our country.” Currently, the Government is blaming it all on the Social Security payouts and pension liabilities. The astronomical pension liabilities are telling on the balance sheets of several states, pushing them on the brink of bankruptcy. This has sparked a fresh row as various states are planning to do away with collective bargaining for public workers. Analysts estimate that it won’t take more than a decade to increase the debt servicing cost three-folds that translates into $840 billion annually!
International EventsThe massive oil consumer as U.S. is, the impact of the global political situation cannot be underplayed. The Jasmine Revolution covers a larger part of Arab and North Africa, including important oil producers like Libya and Iran. The rising crude prices can adversely affect the overall recovery process of the country.
As a matter of fact, almost all the economies worldwide are likely to take a beating amidst the explosive political atmosphere. It remains to be seen how the events unfold and whether Saudi Arabia’s commitment to make up for the reduced oil production holds in the future.
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