The question is will the U.S. economy emerge from its recent funk- or spiral into a full-blown recession?

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The U.S. and Japan, countries of Strong economic background and measurable wealth are now at a stage of serious economic turmoil. Americans are living through a high level of anxiety. The question is will the U.S. economy emerge from its recent funk- or spiral into a full-blown recession? But there is light at the end of the tunnel; a lot of stocks are doing well. Despite awful headlines and a palpable fear, the average diversified stock fund has fallen a manageable 13% in the past year. Lots of people are doing well too. U.S. Job creation is growing at a faster pace this year than in the final months of 2000. Inflation is tame, and interest rates are falling fast, lowering the cost of mortgages and car loans. It looks like as if the economy in the U.S. is still in a very strong position, or is it? The signs of economic slowdown started to show up almost suddenly in the last quarter of the last year. In the third quarter of that year GDP registered a fall to 2.2 per cent and in the forth quarter it slumped to 1.1 per cent. During President Bill Clinton’s era USA saw sustained economic growth almost on all fronts. Even in the first six months of last year (i.e. year 2000) growth rate was so high that the overall growth rate for the year worked out to about 5 per cent in spite of the sudden decline in the last two quarters of the year.

A number of factors worked together to bring about the slide. The USA started the year 2001 with a huge trade deficit. Also increase in the price of oil in the preceding periods is thought by many as one of the factors for triggering the slide. Increase in the price of oil ate away a proportion of the sales proceeds of products and services, for USA has to import a large quantity of oil. Then there was the shrinkage in the corporate profits in the high tech industries encompassing various kinds of electronic goods, computers, chips, Networking, internet related products, cell phones, and also auto mobile. The Nasdaq index lost 8 percent, putting it nearly two thirds of its peak last year. The Dow Jones closed below 10,000, ending its biggest one-week point drop in 11 years. As corporate profit in these sectors shrunk both expected and real dividend from investments in their shares fell. As real and expected disposable income, in the hands of consumers fell in the consequence, demand for goods and services also fell. As the affected industries continued to shed some of their work force, unemployment increased causing further fall in demand.

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Unemployment rate in the US is at its all time high, job cuts are estimated at about 86,000 and jobless rate is at an all time high of 4.3%. The U.S. economy has enjoyed the longest boom in American history, but is it coming to an end? U.S. companies announced more than 150,000 job cuts in March, capping a dismal four-month period in which more than half a million job cuts were announced. Challenger Gray & Christmas Inc. said 162,867 cuts were announced in March, compared with 101,731 cuts in February and only 55,783 cuts in March 2000. It was the ...

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