Economics

The article from Reuters that is the focus of this review basically focuses on the situation of the US economy in February of 2010 following the recent financial crisis. Overall it seems that the economy is on a path to recovery following a hit to the commercial sector as well as to consumption. As the figures show, manufacturing activity is rising while recovering from one of the worst slums in the post-depression period. This however was not enough to stem the tide of rising unemployment that has plagued the economy. This has been a source of concern for political heavyweights including the President as there is further room for damage by the winter blizzards.

The stock market has reflected the path to recovery through a rise through the weeks and the US dollar also gained against the Euro, though also led by external factors such as Greeces adverse economic situation. Consumer spending has also been on an upward motion as households have been getting money to spend on the back of recovery in the economy as well as consumer confidence. Personal income and spending figures were also positive for the month as released by the Commerce department. One area that has failed to recover still is the construction sector where spending has fallen for successive months. Thus overall, the signs of the economy hint towards a modest recovery following the credit crunch but certain sectors still face downward pressure and the employment figures are not showing the long needed improvement that is necessary for a full fledged recovery.

The article is relevant to economics for many reasons. First off, the element of growth and recovery that is constantly being referred to is an allusion to the Gross Domestic Product of the United States. That is a reflection of the overall production done by the US and a growth in the US is a sign of growth in the economy. The GDP can be divided into consumption, investment and net exports as well as incorporating government investment and taxes. As the consumption by consumers has been rising, it has helped lift the economy to a certain extent while rise in investment via manufacturing rise, which also incorporates its own consumption has been a good sign for GDP rise as well. As the business activity and spending rises, the government is able to spend more as well which has a positive effect on the economy.

Unemployment has also been on the rise. Whats relevant in this article is that structural unemployment is being referred to as a cause for concern for the centre. This is because frictional unemployment, which is also on the rise as shown by figures, is due to the continuous hiring and job changing activity that is taking place while cyclical unemployment varies with time. Structural unemployment on the other hand is due to implicit weaknesses in the economy and can be long term, not correcting out by itself. This can lead to less money available to households which has a direct impact on consumption, savings as well as the investment that can be carried out. Thus a rise in structural unemployment will lead to roadblocks on the path to economic recovery for the US economy and growth in the GDP. There are also costs of unemployment in terms of support costs to the state. These elements make this article relevant to the economics course.