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Editors Note: An Economy Stuck in Neutral

Geraldine Gambale, Editor, Area Development Magazine (Fall 2012)
The U.S. economy is in a rut. It only grew by 1.3 percent in the second quarter of this year. According to Chris Jones, an economist at TD Bank, "The U.S. outlook could best be described as one of near-term weakness and long-term strength." It's a study in contradictions.

With home and stock prices rising, consumer confidence is up, but consumer spending is down as Americans reduce their debt and remain cautious. Companies are letting go of fewer people, but they aren't hiring, and many of the unemployed have simply given up looking for work.

Only 29 percent of chief executives at large U.S. companies plan to increase hiring over the next six months, according to a late September Business Roundtable survey - down from 52 percent who said they would increase hiring when polled in early 2011. Only 30 percent expect to increase their investment in capital goods such as machinery, computers, and other equipment. Overall, the CEO outlook index fell to 66, which is the lowest reading since the third quarter of 2009 when the recession officially ended. The CEOs polled by the Business Roundtable are worried about the impact of budget cuts and tax increases that are set to take effect in early 2013 - referred to as "the fiscal cliff" - which they believe could drive the economy back into recession.

Executives recently surveyed by the National Association of Manufacturers (NAM) and the National Federal of Independent Business (NFIB) share their concerns: 55 percent say the national economy is in a worse position today than it was three years ago. More than two-thirds feel there's too much uncertainty in the market to expand or hire, and they further believe that the Obama administration's regulatory policies have hurt U.S. manufacturers and small businesses.

So what's the solution to getting the U.S. economy growing again? Many economists believe the answer is increased consumer spending, which accounts for about 70 percent of GDP. If tax rates are lowered, consumers will have more money to spend, private-sector revenue will increase, and businesses will begin to also invest and hire, reducing unemployment and fostering a cycle of growth. The November elections will tell us whether Americans have listened to these economic arguments - or not.
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