How The Current Economic Climate Affects Us

Written by: MoneyPrime Staff

According to economic experts in the United States, the country’s economic climate is actually quite healthy and looks as though it is getting even better with time. The biggest factor that these professionals look at is the gross domestic product, which is more often referred too as the GDP. This number is the number that tells you what the nation’s production output is looking like. The magic number that economists want to see the GDP at is at 2% to 3% and that is where it currently is! There also is not much inflation or national deflation going on, and the rate of unemployment is currently low and expected to continue dropping as more jobs are created. All of these things together mean that our economic climate is currently in a great position to succeed.

The GDP Rate

The Federal Open Market Committee meeting recently came out with more detailed numbers for what the current GDP looks like and what that means for future projections. The GDP started out at 3% in 2018 which took a pretty large dip down to 2.1% in 2019, and in 2020 they expect it to be all the way down to 1.9%. The reason that the Federal Open Market Committee meeting projected the GDP to slow down was because of what trade war does to the GDP and unfortunately, a trade war is one of President Trump’s major parts of his economic policies.

Unemployment Climate

The unemployment rate is also down, expected to fluctuate a small bit in the next year, but is overall at a good number. For 2019, the current unemployment rate is down at 3.7% and is expected to go down to an even 3 by the year 2020. The Federal Reserve target is at 6.7% unemployment rate, so having this number lower than the target is a great thing, but this does not count the people that work part time currently and are in need of full-time work. It also does not account for the fact that a large majority of jobs that are being offered to people right now are low paying jobs that people have a hard time making a living off of, like those in retail and in the food-service industries. Unfortunately, the unemployment rate was so high for so long that a lot of people were out of work for a long time which means they have had to settle for these low-paying jobs and will never be able to go back to a good paying career. So though the low number of unemployment indicates a good economic climate, it is slightly skewed and the real unemployment rate that accounts for everything is closer to 6% in real life which is still good, just not as good as the widely-reported rate.

How inflation is affecting the climate

In 2019, the inflation rate is at 1.8% which is expected to rise just a bit to 2% in 2020. This inflation rate does not account for things like gas and food prices which are constantly fluctuating, they instead use what they refer too as the core inflation rate which tells us how the economic climate is doing. The Feds want the inflation rate to be right at about 2$, so when looking at the 2% rate that it is expected to stay at all the way through 2021, we can see that our economy is right on track for a steady economic climate, and this includes room for there to be raised interest rates as well.

The U.S. Climate in terms of Manufacturing

According to the Federal Reserve, the manufacturing industry is expected to grow much faster than the general economy. This is due to the ever-growing capital that manufacturing brings in as well as more exports that it has. For 2019, the growth of manufacturing has gone up 3.9%, which is a steady number and is expected to dip a little in 2020 down to 2.4% which is still a great rate and an indication of a steady economic climate.

Does Oil and Gas Prices have anything to do with economic climate

Thanks to administrations like the U.S. Energy Information Administration we are able to predict what the oil and gas prices are going to do all the way out to the year 2050. Of course, eventualities will occur which means that there is going to be some volatility in the estimated prices, but overall the prices are steady and affordable for the climate that we are in right now. The oil market in 2019 is still impacted to what happened in 2015 when the oil prices were reduced by 25%. The good news for our current economic climate is that this means that oil and gas prices are still relatively low and at a steady price which means the cost of transportation, imported foods, and raw business materials are low which has raised profit margins overall. These profit margins are allowing for a slight slowdown thanks to the fact that both companies and families are saving costs on oil and gas instead of spending on it.

Though the current oil and gas prices are steady and make for a steady economic climate, we should be prepared for the fact that the EIA is estimating oil prices to rise from now through 2050 which will have a hefty impact on inflation overall.


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