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Analysis Of The Effects Of Stimulus

The financial crisis and recession have been a disaster for the US and its labor market. The economy has lost more than 7 million jobs since the recession began. The revival of the labor market is expected to be central to economic recovery.

As shown in the diagram below the situation of employment does not reflect an early recovery and as far as the US job market is concerned the figures are much worse than was expected after the stimulus package. However the actual effects would still need some more time to surface and only then it would be clear whether the stimulus was able to address the problems of unemployment.

The U.S. trade deficit narrowed in August as exports posted a small gain, while imports fell on a big drop in demand for foreign oil. The continued rise in exports may be viewed as an encouraging sign that the global economy is starting to recover from a severe recession. But the deficit is expected to rise in coming months on the back of a rebounding U.S. economy, which will start importing more foreign products. But that impact will be dampened somewhat by rising exports as American manufacturers benefit from a revival in the global economy.

Unemployment Rate

The result of the latest Wall Street Journal survey with 48 economists speculates that US economy will witness 3.1 % growth in Gross Domestic Product starting from the third quarter of this year. The economists also predict that chances are less that unemployment will be below 6% from the current 9.8%.

So the example of US suggests that though the package has somewhat improved the condition and has provided stability to an economy in tatters the time is still not ripe to let the market take control.

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* Contributed by: -
Madhav Kumar Sharma, is a student of MBA at NMIMS, Mumbai. His specialization is in Finance. Before joining NMIMS, he had four years of work experience in the merchant navy as an Engineer Officer. His interests include finance and economics.