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 fourth straight month with more than 100,000 cuts. Since December 2000, 540,519 cuts have been announced, more than were announced in many years.
Amongst other signs of economic slowdown Vehicle sales dropped again in November. They're currently down 12 percent from their peak in February. Energy prices were up 13 percent last year and 17 percent this year, acting as a tax on the whole economy.
As a result, consumer confidence is falling -- in other words, fewer people are planning to buy homes, cars or appliances in the next six months and that, could mean trouble. Due to this increasing rate of unemployment, consumer’s confidence is shaken and they are fearful to invest. America is the proverbial 800-pound gorilla. Consumer spending drives the economy. As that goes so does the country. Could anyone anywhere not be worried?
Authorities don’t expect a recession, nor do many other economists, but economic growth has slowed from 5.6 percent in the second quarter of 2000 to 2.4 percent in the third quarter -- the slowest growth in four years, but still respectable. Jobs are still plentiful, but the pace of job creation is down. So are the number of help-wanted ads placed in newspapers. And claims for unemployment insurance are going up as layoffs hit not only the dot-com industry, but banking and manufacturing as well. Many economists say a slowdown in economic growth is a bigger danger than a full-blown recession, which they consider a remote possibility.
The Federal Reserve cut interest rates aggressively for the third time this year in a bid to keep the United States from slipping into recession. The “Feds” cut interest rates a total of 1 % bringing it down form 6.00 to 5.00, The Federal Reserve expects this cut in interest rate will boost the economy of the US and increase investment, due to this cut ion the interest rate the government said 141.9 million people were employed in March compared with 135.8 million in February, which shows a sign of slow economic reform, the strategy implemented by the US government is working and the US is slowly but steadily pulling out of this recession, but if not taken care of appropriately there may be a huge problem in the US economy which will affect the economy of the world tremendously.
On the other side of the pacific another story has to be said. Japan has been suffering form a long economic stagnation for more than a decade, the recent slowdown of the US has effected the Japanese economy enormously, Japan is the second largest economy in the world and is totally export dependent on the U.S. As the demand for Japanese cars and electronics rock bottomed the Japanese have entered into an early phase of recession. Japan’s problems make prospects of the U.S. economy look downright sunny. The main cause of the Japanese economic slowdown is this reduction in trade surplus, which is due to a fall of exports of Japanese commodities in the US markets. By the end of this month the Japanese government, will have a total public debt of $ 5.5 trillion dollars, a head spinning 130% of GDP, on the other hand the Americans have a mere $3.4 trillion in Federal public debt, i.e. 35% of GDP.
Foreign investors are not eager to invest into the Japanese economy in their current situation, as a result Japanese economy, will plummet even further. In order to increase investment in the economy the Bank of Japan cut interest rates to near zero. The central bank's Policy Board lowered the overnight money-market rate to 0.15 percent from 0.25 percent and cut the more symbolic discount rate to 0.25 percent from 0.35 percent. But it did not seem to work any magic for the Jap’s as it did for the Americans, Japanese techs suffered particularly badly. Nasdaq hit a two-year low on March 5 2001. The Nikkei was undermined by falls in fiber-optic makers such as Furukawa Electric Co. JDS Uniphase Corp, the world's largest supplier of fiber-optic components, said it would cut 3,000 jobs, or 10 percent of its work force. It faces slowing demand in foreign markets and growing competition. There are many high tech companies in Japan with stories similar to that of Furukawa Electronics, the risk to Japan going into a full blown recession is very real.
The US is the biggest importer of Japanese commodities in the world, and as the US is facing problems it has no time to look over its shoulders and help the Japanese to recover. Will this be the end of the Japanese capture of the world market? Well, it’s too soon to say. But are the third world countries like Bangladesh out of the kill zone, I don’t think so. The U.S. is the largest consumer market in the world, and as the economy of the US collapses so does the world. The countries mostly affected will be the third world or developing countries. Third world countries like India, Pakistan, Bangladesh and Sri Lanka will be most drastically affected by the upturn of the two most powerful economies of the world. If we emphasize on Bangladesh we can see evident proof that there will be serious economic implications in our economy.
The major exports of Bangladesh are garments, jute, jute goods, leather, and shrimp and the countries exported to are US 33%, Western Europe 39% (Germany 8.4%, Italy 6%) (FY91/92 EST.) Because of the U.S. economic slowdown the demand for the exported commodities will reduce significantly, as the result Bangladesh will suffer from a much more greater trade deficit, Stopping the progress of Bangladesh in its tracks.
As for imports Bangladesh is ever more dependent on the U.S. than any other country of the world. The major import items in Bangladesh are, capital goods, petroleum, food, textiles and fertilizers. And the import partners for Bangladesh are Hong Kong 7.5%, Singapore 7.4%, China 7.4%, Japan 7.1% and U.S. 9.84% (FY91/92 est.) and the total imports in 1998 totaled $4.7 billion, of which $ 53.752 million was from the U.S. alone, the crippling U.S. economy can no longer sustain the export of its goods to Bangladesh due to its own problems, Bangladesh is on the forefront of being affected by this recession.
The world has now become the Global village and chopping of the head of the lion will leave the rest of the body dead, this is what is happening to the U.S. the coldness of the economic slowdown is felt very strongly, mainly by Japan, who is the largest exporter of electronic and automobiles to the United States. As soon as the slump hit America, Japans trade surplus plummeted to a rock bottom of a mere 64.8 trillion dollars in 2001 while it was at a staggering 800.9 trillion dollars at the beginning of the last decade. The Japanese economy slowly moved towards recession independent of the U.S. but the recent U.S. economic slowdowns have boosted the economy into ruins.
Not only for Japan all major export countries to the US will be seriously affected due to reduced demand within the US economy. The scenario of 1932 is even closer than we think.
The big question is whether this will indeed change is the months ahead, especially if the carnage in Wall Street continues. We might better cast our horizons lower – and look towards what the Joneses are doing. One afternoon last week Lindsey McKenzie, a nursing assistant with tree kids, tried on three pairs of sandals at George’s Shoes in Boston. She held on to a black and a white pair wistfully. You could almost see her Neurons wrestling with the eternal question.
“To buy or not to buy?”
“I don’t have the money this week,” She finally told the clerk. She exited the store, her belt a notch tighter, figuratively.
The fate of the worlds economy now rests on a billion such small decisions, played out in a store aisles and around kitchen tables across America.
The end is closer than we can imagine!
