Recovery from Recession and the Challenges
Economic indicators are optimistic, and Americans are reading stories of the macro effects of recovery. It is good news that the housing market is indicating a positive growth, with Freddie Mac and Fannie Mae registering remarkable profits. Besides, the rate of unemployment is also decreasing, with a low 5.9 percent unemployment rate in September, 2014. However, in order to Sustain GDP growth, there has to be sustained growth in potential output by the labor force. According to the Congressional Research Service report, there is a concern about the decreased rate of unemployment and the low labor force participation. It has been attributed to the increasing aging population that increases the number of people who are not looking for work. The following is a look at the housing market, production, and rate of unemployment in America since recession.
Since 2012, when the mortgage lenders, Fannie Mae and Freddie Mac reversed the losing trend, they have been able to pay back $218 billion of the taxpayers’ money. It is a good pointer that the housing market is recovering since the bailout of the mortgage corporations with $187 billion. According to a report by Fannie Mae, 68 percent of Americans said that September, 2014 was an appropriate time to buy a home. August, 2014 was the best month in new-home sales since the 2008 when home sales rose to 504, 0000 units according to the U.S. Department of Commerce’s Census Bureau. The number of completed transactions, as indicated by the total-existing home sales has been relatively low, probably due to lack of capital to buy homes.
The National Association of Realtors reported that the inventory has been balanced, but there is a restricted and slow rate of recovery. One cause of the slow recovery rate is the low involvement of first-time home buyers in the housing market. In addition, more investors are required in the real estate in order to increase the availability of loans to the first-time home buyers. On the other hand, the low rate of first-time homebuyers could be attributed to the unaffordable mortgage rates, therefore, opting for rentals. Since first-time buyers are mostly the new employees who are mostly fresh out of college, the state of employment in America determines the performance of the housing market.
Report by the federal government on 16 October, 2014 is also positive on industrial production and capacity utilization. In September, 2014, there was an improvement in the Industrial production index by 1 percent. In particular, there was an upward trend in the manufacturing sector, which recorded a growth of 0.5 percent from a decline of 0.5 in the previous month. Capacity utilization increased by 2.9 percent from last year September to 79.3 percent. The indicators show a positive trend in productivity that will lead to improved Gross Domestic Product.
According to James Sherk of Heritage Foundation, about 6 percent of Americans are on Disability insurance, and the number is increasing due to retirements. The reliance on social security is a burden to the economy because the old are not participating in the production. Since 2007 to 2013, the number of people attending schools has also increased by 1.9 million, hence the low 3.1 percent labor force participation rate. However, for sustainable growth in GDP, the government needs to put up policies that will attract investors to put up more industries. The policies can include lowering taxation rates and lowering the cost of starting a business doing business in America.