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  • Rovindu Ambagolla

Monday Market Musings >>> Two Sides of the American Economy

Picture Credit: Lukas Zischke

The American economy is one of the largest and most powerful economies in the world with a mighty GDP of almost $21 000 billion, which is close to $6000 billion more than China’s GDP. However, even the most powerful economy in the world was adversely affected by the 2019 Coronavirus pandemic as the world went into a total lockdown.

We are entering the third year of living under the pandemic, and the global markets have slowly started to return to its usual pace. However, the world has inherited a broken and strained world economy, with hundreds of countries suffering from shortages. Experts believe that some countries might even take till 2025 to fully recover from the devastating effects of the Coronavirus pandemic. However, countries like the US are one of the few countries that experts deemed would recover by the end of 2021, so how are they faring?

The American economy was booming in the second half of 2021. The unemployment rate fell to 3.9%, a rate which is historically considered to be near full employment. Wages are also on the rise, especially for low-wage workers. Jerome Powell, Chair of the Federal Reserve of the United States, commented that the labour market was “tremendously strong”. This improvement is in stark contrast to “The Great Resignation” in 2021 where millions of Americans quit their jobs because of low pay.

The housing market is booming as well. Housing prices across the country are at an all-time high giving homeowners record equity levels in their property. 401k (American retirement funds) have also hit record-breaking highs due to high pandemic saving rates and a thriving stock market.

However, America seems to be dissatisfied with these developments as recent polls have depicted that only about 28% of Americans think that the economy is at a good/excellent level. Why is that?

Picture Credit: Engin Akyurt

Even though the economy is considered to be strong, so is inflation as prices are soaring through the roof. Moody’s Analytics has estimated that an average American family is paying $200 more per month to purchase the same goods. Similarly, although the housing market is doing well for homeowners, it’s quite the opposite for tenants as the rental rate rose by 10% last year.

This mix of price hikes along with the almost never-ending fear of the Coronavirus has strained the American economy and its people.

January 31st 2022 | 8:15 PM

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