Is The US Economy Nearing Another Recession?

Consumer confidence has reportedly declined following the unresolved issue in unemployment and the falling economic outlook. In fact, the Conference Board has recorded a 4.8-decrease from July this year. This was the biggest decline of consumer confidence in the US since October of last year. The problem is, with the 2013 Elections looming, the Senate would probably be too busy campaigning to actually offer immediate solutions.

Just recently, the country was bombarded with issues on rising prices of commodities, unemployment, unregulated interest rates, unregulated bad credit loans and limited income gains. The implementation of state laws and programs that target these issues has been minimal. In fact, individuals who expect to experience a decrease in their monthly incomes have increase by 16.8% this year. As a result, household purchases are slowly pulling back.

Economists say that if 70% of all households do not engage into a healthy merchant-consumer relationship, it could mean a possible decline in the national economy. At present, the US economy is so fragile that small prolonged disturbances would most likely send it spiraling back to recession.

Increase in Housing Costs

A separate report shows that starting last year; home prices in twenty cities have increased. The improvement of the industry has precipitated the recession is good news. The bad news, though, is that this forced families to live longer in apartments than to buy homes.

Mortgage, on the other hand, went down by 0.04% compared to last month’s rate but it is still too costly for ordinary homeowners. Paying the mortgage is not the only thing on their list, there are plenty more. So unless the prices of commodities decrease and the employment rate increases, going back to recession will always be a possibility.

Increase in Unemployment Rate

The unemployment rate has increased to 8.3% by July of this year, or about 5.4 million able employees. Although the statistics is better than the all-time high of 10% increase as reported in November of 1982, the rate is still very high. This is because the average unemployment rate in the United States is only 5.8%.

The addition of 80,000 jobs in June was only reciprocated with the 4,000 government cuts; therefore, the unemployment rate remains unchanged. The official rate only captures those who have gone back to the labor market actively seeking jobs.

There’s still the underemployment rate to consider, which consists of discouraged job-seekers who have stopped looking for work as well as the part-time workers who prefer full-time employment.

Increase in Waste Shipments

Economis Michael McDonough believes that there is a strong relationship between the state of the economy and the number of waste shipments. The logic is that rich buys more things and consumes more; hence, they produce more wastes. On the other hand, the poor buy less, consume less and produce waste less.

Apparently, the waste shipments have drastically declined since the beginning of the year. If the theory on waste and economy relationship is true, then economists fear the recurring of an economic collapse.

Immediate Solutions

One of the main reasons why the labor market is still very weak – there aren’t enough jobs available. So to reinforce consumer confidence, jobs should first be generated in almost all sectors known. Telecommuting is a popular choice, thanks to the power of the Internet; but only a small part of the population actually choose this line of work.

The prices of commodities, primarily the fuel, are dependent on the world market. These are influenced by things beyond the government’s control. Yes, the government can regulate the prices but it cannot dictate how much the pricing should be. So instead of buying autos, consumers have reverted their efforts and scarce financial resources to buying homes instead.

With the increase of US citizens expecting shortage in their income, they have turned to nontraditional lending facilities. This increased demand for loans is what encouraged the mushrooming of bad credit loan providers across the Internet. The increase of lenders then led to stiffer competitions, which the end beneficiaries would be the borrowers. It’s a cycle.

It is important that consumers be assured that the government is working on re-strengthening the economy despite the looming elections. Bear in mind that a decrease in optimism would also signal the difficulty in strengthening spending. And that would, in turn, only cripple the overall US economy.