Paul Buckley ’17, Alex Gorgoni ‘17
As we previously mentioned in the first part, 2014 was a year of economic prosperity in the United States with positive energy streaming into 2015. So far in the first quarter of 2015 markets have remained in the green with the Dow Jones Industrial Average, S&P 500, and NASDAQ up 0.86%, 1.33%, and 4.46% respectively year to date. However, while US markets have been strong so far this year, there remains growing concern on the global front as the health of the Eurozone still remains a question.
While the United States economy has strengthened and pulled itself out of the hole we dug during the Great Recession, other countries haven’t been fortunate to experience the same recovery. Europe as a whole has experienced turmoil in their recovery due to the ongoing European debt crisis which has seen interest rates skyrocket and bailout programs initiated. While the larger economic powerhouses such as France and Germany have been able to keep interest rates relatively low (sub 4%), the smaller members of the EU have seen rates climb close to 30% with no end in sight. Notably, Greece has been at the forefront of the crisis as constant promises and measures to tackle the countries debt burden have fallen flat. While the US has remained strong during the turmoil, the further decay of Greece’s economy and the recent extension of the Greek bailout by the German Parliament can have devastating effects on the Euro and has the potential to eventually hit the US hard. The fall of the Euro due to the debt crisis could spell a nightmare for several European economies which have lent heavily to Greece in the past; if Greece collapses, an almost domino effect could take place, tearing through the rest of Europe and by extension the United States, causing credit lines to dry up in a manner similar to the aftermath of the Lehman Brothers’ collapse in 2008.
Although the unemployment rates have decreased over the last five years (from 8.6% to 5.7%), not many people feel as though the labor market is healthy. The unemployment rate is falling, but, it is still higher than the pre 2007-09 rates, which leads many to believe the US economy really in fact has not recovered.
Even though the unemployment rate (most likely) will not decrease the way it did in 2014, in 2015, it will decrease some. As the rate nears closer to 5%, economists believe that it is the threshold of feeling the true effect of the labor market growth claims. By the end of 2015, Americans should at last feel the labor market growth behind them.
As inflation began to increase in 2014, it was offset by plummeting oil prices. An increase in supply along with over all slower global growth caused what we’re rising inflation rates to be stopped in their tracks. Economist Neil Dutta says that it will give each household boosted inflation adjusted wages which gives US workers more bang for their buck. Essentially, people will have more money to spend.
Although countries outside of the US may be slowing or facing larger amounts of trouble, the United States will hold strong. Slow growth exterior to the country will not hurt all that much. Although American exports may dip, the offset will come from lower costs imports of petroleum due to plunging oil prices. In saying this, the trade deficit (most likely) will not get any more threatening.
What can be said about the rest of the coming year? Well, the US is on the right track in terms of employment and economic growth in addition to performing well while foreign nations struggle.