Everywhere it has been reported that the economy is very healthy right now. Job availability is increasing, putting us at optimal levels of unemployment, most recently it has been reported wages are increasing substantially (about 2.8%), hidden unemployment seems to have gone down, and the labor force seems to have grown. There is slight inflation, but this is healthy, meaning income increases have not had any dramatic impact on comsuption. The second article looks at how this may change with the election, with proposed decreased taxes, and increased government spending, both fiscal policies may actually end up yielding similar results in attempts to grow GDP and reduce the deficit.However, we need to look at more than just these two policies and their impact on GDP. The trade deficit is likely to be shaped by possible new policies which will in turn impact the real exchange rate for small open economies.
The initial impact of the change in fiscal policy by the new president will have a greater scale effect in the long term on small open economies most impacted by trade with the US. As smaller open economies adjust, in the long term, the US will start to see the implications of our policies.
The economy today, is looking similar to the way it did just before the recession in early 2008, leaving it up in the air if the change in office will cause a boom or bust.
http://www.nytimes.com/2016/11/05/business/economy/jobs-report.html?rref=collection%2Ftimestopic%2FUnited%20States%20Economy&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=4&pgtype=collection
http://www.wdef.com/2016/11/07/how-the-economy-stacks-up-for-donald-trump-and-hillary-clinton/
The last time the unemployment rate was running this low was in early 2008. But by Election Day that year, the economy was in sad shape and getting worse by every measure. Hundreds of thousands of jobs were vanishing, housing prices were plunging, paychecks were shrinking and credit was tight. Many Wall Street analysts said the positive economic news would make it even more likely that policy makers at the Federal Reserve would increase the benchmark interest rate before the end of the year.
ReplyDeleteWhat each candidate intends to do for the economy is pretty standard based on what their respective parties have done in the past i.e. for Hillary she would increase taxes on the wealthy and boost federal spending. It's just that these candidates are going to proceed with fervor. Trump is definitely ambitious as he hopes to increase GDP growth rate to 3.5% which would be an amazing feat. I think the most interesting position of where to go with the economy, is decisions affecting trade policy. Both candidates ended up opposing the TPP so I wonder how else trade policy might be effected because that would impact our growth.
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