A quiet day for the US economy, since no fundamentals are scheduled to be released today; while pessimism dominated stock markets yesterday, though data released signaled that the world’s largest economy is indeed recovering from the worst recession since WWII, as conditions continue to improve gradually, yet still it seems that the recession is indeed coming to an end.
The US economy although is still facing challenges ahead, despite of the recent improvement in consumer spending due to the fiscal stimulus, yet rising unemployment, declining income growth, lower household wealth and tightened credit conditions continue to weigh down on economic activity in the United States.
The labor market is seen as a major threat to the course of recovery now, where unemployment is now standing around it highest level since 1983 at 10.00%, and unemployment might indeed continue to rise in the upcoming few months, since employers are still shedding more jobs, although on a slower pace, but more employees are still losing their jobs as a result of the ongoing economic weakness.
US President Obama recently highlighted that there is a need for further support to the labor market, where Obama suggested that the government use what is left from TARP money to boost labor market activity. The House of Representatives already passed the bill even as no Republican voted for the plan and even some Democrats were against the bill; however, the bill will now go to the Senates, where the battle will be much more difficult and could even end up being rejected.
The current weak economic conditions will discourage US companies from hiring new workers, especially amid expectations of sluggish demand levels from consumers, as companies are still adjusting their inventory levels to meet the current weak demand conditions. Nevertheless, activity is starting to show signs of recovery, as production levels are indeed stabilizing or even increasing although at a slow pace for the time being.
This all confirms that the US economy will continue to recover throughout 2010; however, the economy is still expected to fall short from achieving its long term growth potentials, where most expectations signal that the economy will be able to fulfill its long term growth potentials during 2011.
Investors will continue to scrutinize the outlook and will adjust their expectations based on any new information they receive concerning the US economy. However, we still can’t relax now, since the worst is over but we are still not out of the woods yet, and there’s still a slight chance that conditions might deteriorate back, but for now, we would expect the economy to continue its gradual recovery until it can reach prosperity…
