In the New York Times article, “US Economy Barely Grew last Quarter, Stoking Concerns about Momentum in 2016,” author Nelson Schwartz explains many aspects of the macro- economy and the results of the end of 2015 and some things to watch for early 2016. Schwartz begins his analysis through his dissection of the components that make up Gross Domestic Product and their growth levels in the last quarter and last year in comparison to years prior. GDP is the general productivity of a nation made up by the components of Consumer spending, Government Spending, Investment, and imports and exports. The article states that last quarter, the economy slowed to around .7%, as previously predicted by economists, yet overall 2015 provided similar numbers to 2014 with GDP growth of 2.5%. This number makes sense for a healthy economy because the average growth is around 3% per year. Schwartz states that a strong dollar in the US is actually negatively affecting NX and making it more difficult for big business to invest and expand overseas. However, domestically speaking, consumer spending on services and housing (which impacts investment) have been strong; CS even grew at 2.2% last quarter. It is predicted that 2016 will provide similar numbers and growth.
Additionally, Schwartz mentions other aspects of the economy like the unemployment rate and interest rates changes by the Fed. Currently, there is a tight labor market since unemployment rates are so low. Some think that the rate could even drop to 4.5% within the year. Consequences of a tight labor market will be the result of higher wages for workers since there are so few people without jobs that employers will have to “steal” workers and provide incentives for them to choose to change employment. The Fed also raised interest rates from near 0% to between .25% and .5% at the end of the year. Schwartz mentions that there might be another interest rate hike since there is improvement in the labor market and inflation is low.Link: http://www.nytimes.com/2016/01/30/business/us-economy-gdp-q4.html?ref=economy
One of the main reason a strong dollar negatively effects NX is because foreign markets can't afford to buy US products when our dollar is stronger than their currency, thus hurting exports. I appreciate that you mention the strong consumption rates but it is worth mentioning that people are more willing to spend when they have optimistic expectations of the future- this is in part due to faith in the government and potential monetary and fiscal policies. I wouldn't be surprised if we saw consumption +/- based on presidential nominees. The labor market could also have some unsteadiness if the $15 minimum wage goes into affect and could cause an increase in unemployment thus decreasing wages.
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