Is America’s Economy Encountering a Growth Period? Depends Who You Ask

Earlier this year the American economy encountered some growth, which is good but not enough to be an encouraging sign.  From April 2021 to June 2021 the acceleration of US’s GDP was 6.6 percent according to the Bureau of Economic Analysis. While that may sound impressive, economists had hoped the figure would have been closer to 8.5%. but there again, the number was still the highest it had been since September of 2020, in the thick of the pandemic.

Bill Adams, a senior economist at PNC Financial Services Group said:

“Business inventories are way too low. It is hard to overstate how screwed up global supply chains are. Delivery delays and shortages have made it extremely difficult for businesses to maintain inventories and prevented an even faster economic rebound.”

While there is definitely cause for optimism with economic recovery, The Economist Intelligence Unit’s global economist Matthew Sherwood points out that it is still not as strong as it should be.

In addition, due to the coronavirus Delta variant, fear has returned and that has impacted the recovery.  While July saw the lowest unemployment figure in America since the pandemic began, this month has shown people going back to their home spaces to work and companies less inclined to continue the hiring boom. 

It seems therefore that it is very much a case of two steps forward and one step back which a) make it difficult to estimate for the future and b) has to result in an increase in caution.

US Economic Growth

With the pandemic raging around the world, America’s economy – like all the others internationally – has gone through a lot.  Now that the world is sort of entering into some kind of ‘new normal’ even with the pandemic, it is important to look at what kind of growth (or lack thereof) there has been with it.

There is actually some good news on this front. In Q2 2021 there was an 6.5 percent growth which has put the economy past the level it was at before the coronavirus hit.  Indeed GDP (according to the latest report from the Commerce Department) expanded in that quarter from its already solid 6.3 percent annual growth rate from Q1 2021.

Still, this was significantly lower than what the economists had hoped for which was over 8 percent but at least there is movement and the fact is, supply chains had been clogged because of the economy’s rapid reopening.

In other good news consumer spending jumped significantly for the second consecutive quarter.  Figures were: spending on goods (11.6 percent increase), spending on services (12 percent increase).  There was a jump in annual rate for the second quarter for businesses for 8 percent which increased the GDP by 1.1 percent.

According to a Wells Fargo senior economist, Sam Bullard:

“Consumers have plenty of income and wealth ammunition to support consumer spending, while business inventories remain lean and restocking efforts are poised to support business investment and overall GDP growth substantially in the second half of the year,”

So really, the economy is in a better state than it was at Q4 2019.

US Economic Growth: Here Today, Gone Tomorrow?

While America’s economy witnessed significant growth in Q2 2021, it seems that this will not be long-lasting. Given that the economy is kind of going back to some kind of post-pandemic “normal,” there could be a drop in economic growth.  According to Moody’s Chief Economist Mark Zandi:

“Growth has peaked, the economy will slow a bit in the second half of this year, then much more noticeably in the first half of 2022 as fiscal support fades. The contours of growth are going to be shaped largely by fiscal policy over the next 18 months. The tailwind just blows less strongly, and may stop altogether by this time next year.”

In 2011 America’s share of worldwide GDP was at a low of 21 percent.  In 2020 this number increased to 25 percent.  In real dollar terms, at the beginning of 2010 average incomes were recorded for Americans at more than 25 percent higher than their European counterparts. By the end of 2020 that figure had jumped to 60 percent.

Confidence in SMEs increased along with the United States’ share of global stock markets (from 42 percent in 2010 to 58 percent in 2020). The dollar gained almost unprecedented dominance, placing America in a leading global position.

However, just over a decade ago America owed the world a total of $2.5tn (the same as 17 percent of US GDP).  By early 2020 this had increased to over 50 percent of GDP at $10tn. That figure currently stands at $14tn and (GDP) 67 per cent, creating cause for concern.

US Economic Boom Predicted

The American economy has historically been in far better shape, however, there was a 6 percent growth in Q12021 thanks to stimulus checks and vaccination rollout which led to an uptake in consumer spending. In addition, it is hoped that Biden’s promise of massive new federal investments will continue this trend of growth.

Post-Pandemic Prosperity

America’s economy seems to be coming back from the pandemic, having recorded its  fastest first-quarter GDP growth in nearly four decades.

Consumer spending is up (thanks to tax credits and stimulus checks).  Hiring is also increasing, even in New York where just a few short months ago it seemed like the pandemic would never end. Moody’s Analytics chief economist Mark Zandi said:

 “I’ve never seen an economy that feels as good as this one today. The economy is booming. It’s busting out all over.”

Further, Oxford Economics predicts a growth of American GDP to average out this year at 7.5%, higher than what we’ve seen for nearly 70 years.

However, there is still great cause for concern given unemployment numbers (which indeed is substantially less than a year ago) given that there are an additional 4 million unemployed Americans than there were in February 2020. To counter this, continued China trade will be required in particular in movies (which accounted for 30 percent of China’s box office sales in 2019) and education (exports support more than 3 million people who work in the industry in America).

US Economic Recovery

Thankfully it looks like the American economy is recovering, as is that of China.  This is having a domino effect on optimism for the global market as IMF’s Managing Director Kristalina Georgieva explained:

“While the outlook has improved overall, prospects are diverging dangerously not only within nations but also across countries and regions. In fact, what we see is a multi-speed recovery, increasingly powered by two engines — the US and China.”

Thanks to vaccinations and more US stimulus money the IMF is predicting economic growth at 5.5 percent for this year. Further, there were over 900,000 jobs added in America in March which is the largest leap since August.  As RSM US Chief Economist Joseph Brusuelas said:

“An American economy about to regain its swagger after a year of pandemic-induced crisis was on full display in the March jobs report.”

Furthermore, according to a recent CNN Report based on IMF predictions:

“At $1.9 trillion, the Biden administration’s new fiscal package is expected to deliver a strong boost to growth in the United States in 2021 and provide sizable positive spillovers to trading partners.”

With the increase of Americans’ purchasing power, this will positively impact international consumer spending as they purchase French fashion, Italian cars, Australian precious metals, etc.

Tips with IDT Energy on How to Save on Electricity Costs

Utility bills can be pricey but what many household heads do not realize is that with just a few simple tweaks, bills can be substantially reduced. IDT Energy seeks to focus on providing energy-efficient solutions for its customers so that all Americans can benefit from reduced bills. 

According to EIA 2019 figures, the average residential family spends approximately $118.8 on their electricity bill (over $1,400 per year). This figure may not seem exorbitant, but if even a few hundred dollars per year could be put back into one’s pocket, then that is an appealing thought.

Here are a few simple suggestions to get you started:

  1.  Contact the US Department of Energy to find out how to undertake a very simple home energy audit. That way you can go through each room as well as past electricity bills and figure out where there is money to be saved.
  2. Lower the thermostat.  Even by one or two degrees.  This makes a huge difference to heating/cooling costs
  3. Unplug, unplug, unplug.  Whatever you are not currently using, unplug it. Think about the dishwasher for example that you only put on once a week or the computer.  Turning off lights is also recommended since that saves $0.04 per 40 watts.

Saving money on electricity and utility bills really is quite simple.  It is just a case of increasing awareness and being in the know.

Assessing US Economic Recovery

It is not so simple to pinpoint a trajectory for economic recovery vis-à-vis the continuing impacts of the pandemic.  Jerome Powell of the Fed believes it will depend a lot on how the pandemic plays out and in respect to government regulations.  With new mutations and the resurgence of a more contagious stream, he insists that we remain aware that it is not over yet and people must continue to “stay focused on it as a country and get there. [He added that] the path of the economy continues to depend significantly on the course of the virus. A resurgence in recent months in COVID-19 cases, hospitalisations and deaths is causing great hardships to millions of Americans and is weighing on economic activity and job creation. Overall, economic activity remains below its level before the pandemic and the path ahead remains highly uncertain. As with overall economic activity, the pace of improvement in the labour market has slowed in recent months.”

It’s not easy that the burden has not been shared equally among all  Americans. Those who have suffered the most include low wage owners, African Americans and Hispanics.

Having said that, there is some indication of an economic recovery. There were 22  million jobs lost in March and April of 2020 from the pandemic.  Half of those have come back.  The economy is also only operating at 82 percent capacity. And with the vaccine and additional stimulus checks this could also forge the economic recovery further ahead.