9 Reasons Why the U.S. Economy Is Kicking the World's Butt
It may be hard to believe, but the U.S. economy is giving the world a run for its money. Compared to most major developed nations, the U.S. is out-performing in terms of most major economic indicators. It seems we've managed to escape the grip of the Great Recession more quickly (and with perhaps less lasting damage), than many other wealthy countries. Read on to learn why today's American economy is the envy of the world.
1. Higher GDP Growth Rate
The U.S. economy's 2.4% GDP growth rate in 2014 was the best since the recession — and it's expected to grow an even stronger 3.4% in 2015, according to Forbes and the Economist Intelligence Unit. Our GDP growth also exceeds that of many other developed nations; the Euro area grew by a modest 0.9% in 2014, while Japan's economy actually shrank by 0.8%. And while emerging market powerhouses like China are still clocking growth rates of over 7%, this is a lower level of growth for them that actually poses some concern for their economic prospects. The U.S. economy, meanwhile, is on an upward trajectory.
2. Lower Unemployment Levels
Greece's unemployment is over 25%. France's is over 10%. Even Canada and Australia's are over 6%. But the American unemployment rate currently stands at about 5.5% — a marked decline since its peak of over 10% during the worst of the recession, and a good deal lower than many other developed nations'.
3. Stable Inflation
Both too much inflation, and its opposite, known as deflation (or negative inflation) are of concern to economists. That's because stable prices are essential for maintaining a healthy rate of growth and employment. During the Great Depression of the 1930's, for example, some years clocked deflation of about 10%. Meanwhile, the recession of the early 80's came packed with whopping inflation rates some years of over 13%!
So, it should come as no surprise that America's relatively stable 2014 inflation rate of about 1.6% is the envy of other developed countries — such as many in the Euro area, where negative inflation has developed. In fact, some economists say the U.S. could actually stand to have a little more inflation for optimal results.
4. Resource-Rich Economy
The political instability in places like Venezuela, the Middle East, Ukraine, and Russia terrify many countries who rely upon their energy exports to fuel their economies. But it isn't only oil that's a concern — grains, food products, and a variety of other raw materials or agricultural good imports are also important to many countries who don't produce enough of their own. The U.S. finds itself in an advantageous position in this regard, thanks to its ample domestic supply of many essential resources.
5. Younger Population
A younger population means many things. It is more dynamic and innovative, leading to new ideas and companies. There are more able-bodied workers to fuel our industries. And of course, having a larger supply of younger workers is also a buttress for social programs, such as Social Security, which are largely financed by their contributions. Many European nations and Japan are rapidly aging, and face dire economic consequences, as a result. The U.S. has higher birth and immigration rates to thank for this advantage.
6. Stronger Banking System
American regulators responded effectively to the banking crisis, instituting programs such as The Troubled Asset Relief Program (TARP) and requiring banks undergo scrutiny of their financial position via the so-called "stress tests." The Fed also backed the acquisition of troubled or weaker banks, such as Washington Mutual, by larger banks, thus helping ensure the stability of the financial system. Today, the U.S. banking system is relatively strong and well-capitalized. Meanwhile, banks in parts of Europe, where stress tests took longer to be implemented, still face concern.
7. Effective Use of Stimulus
The stress tests and TARP are just a couple of examples of how the U.S. took the lead during the recession in ways many of its developed country counterparts didn't. The U.S. responded to the recession more quickly and aggressively, instituting strong stimulus measures to combat the downturn early on, including bond and asset purchases known as Quantitative Easing, sharply lowering interest rates, extending unemployment benefits, bailing out the now-profitable auto industry and financing shovel-ready projects. Europe and Japan took much longer or didn't implement stimulus as aggressively; the result, some economists say, is a markedly weaker recovery in those countries.
8. Strong Dollar
Not everyone is thrilled by the strength of the U.S. dollar (exporters, for example, find it tougher to sell their wares abroad), but the strength of the dollar is great news for U.S. consumers, who enjoy cheaper prices on imported goods. The strong dollar is also evidence of America's relative economic strength (after many years of trading for less than the Euro, the two currencies are now nearly at parity to the Euro, for example). It's also partly based on the belief that we'll soon begin raising interest rates; a stronger economy means interest rates can finally rise, and higher rates draw more investors into the U.S. economy, thus boosting the dollar.
9. Strong Stock Market
"The stock market is overvalued and due for a correction any day," say pundits. "It's a bubble — people but stocks only because interest rates are so low and they can't get returns anywhere else."
Even if those two statements were true, they still don't negate the fact that U.S. equity markets have been on a tear in recent years (the S&P 500 and NASDAQ are both near record highs). And that's in part because investors from around the world still trust our companies and stock markets.
But there's something else happening here, too: Merger and acquisition activity, as well as IPOs, are by some measures back to pre-recession levels. That' the stuff the economy runs on — new companies being launched, and existing companies being bought and sold. That this type of activity is up is further evidence of trust not only in U.S. markets — but in the U.S. economy, as a whole.
Are you benefiting from the strong U.S. economy? Tell us how in comments.
Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.
Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.
