Labor market, Fed policies keep US market, economy safe from global unrest

The US economy has managed to recover from the 2008 financial crisis due to series of corrective measures in the policies but now the troubles in the global economy are posing series threats to the American market.

The sliding 18-nation Eurozone, the fatal Ebola outbreak across West Africa and Israel’s war in Gaza are leading to another recession. The ongoing war between Russian and Ukrainian troops is adversely affecting the global economy and disrupting trade. The Ebola menace has added to the woes on the health front, with claiming over 700 deaths and the toll continues to rise.

The world economy slowed down in the grim summer but some remarkable and positive developments has pushed the US economy, helping it to recover after five years of the great recession.

“The message is clear: The global economy will see very little acceleration this year,” said Sara Johnson, senior research director of global economics at IHS Inc.

Johnson has earlier forecasted world growth of 3 percent for this year but has since marked that down to 2.8 percent.

“I expect growth will disappoint; nevertheless we will stay out of recession,” Johnson said while underlining that for the global economy less than 2 percent growth is considered as a financial crunch recession.

The speedy hiring process, Federal Reserve’s ultra-low interest rates, high factory production and more profits at the businesses…all have cushioned the US economy from the economic damages occurring in world market.

US economy and its strengths

Employment

The US labor market witnessed signs of improvement as hiring surged in the first seven months of this year. According to latest government figures, around 35,000 more jobs are being created each month compared to 2013. The private companies in the US added 218,000 jobs in July, said National Employment report which was released jointly by Moody’s Analytics and Automatic Data Processing (ADP). Meanwhile, the latest report released by the US Labor Department showed decline in the initial unemployment claims for jobless benefits. Experts say a declining trend in jobless claims is a good signal for labor market.

US Central Banks

The Fed has been cutting down its bond purchases pace and hopes to end them altogether this fall. The purchases have held down longer-term rates and pushed the consumers and businesses to borrow and spend.

Meanwhile, the Fed has said that it will continue keeping short-term rates at lower levels even if unemployment reaches a level usually linked to high inflation.

Several economists have projected that the Fed will not be lifting the short-term rates until mid-2015.

High profits

The earnings of companies at the Standard and Poor’s 500 index are on track to rise 10 percent in the second quarter from 2013, according to research firm S&P Capital IQ. This has advanced the S&P 500 index to nearly 6 percent this year. The gains have also been remarkably steady.

All these factors have so far boosting the US economy and rescuing it from external threats emerging in global markets. But experts are skeptical over the present trend and looking forward to some sustainable measures.

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Christina Langfold

Remember that weird girl in school who never quite managed to fit in? Who was always silent and strange? That was me during my entire teenage life. A few years after finishing college (with a degree in arts) I decided that the best way to become more sociable, while also feeling safe, is to test my people skills online.