The American economy has suffered the deepest and most protracted recession since the Great Depression. The financial crisis that began in the fall of 2008 had enduring effects on economic performance. In the first quarter of 2009, real gross domestic product (real GDP) fell by 6.4 percent. Real GDP fell for four straight quarters, from third quarter 2008 through second quarter 2009. The good news is that we have enjoyed more than three years of uninterrupted economic growth (Real GDP) and falling unemployment since the recession ended in June 2009. Economic growth (real GDP) has averaged less than 2.1% since the recovery began July 2009 and is have slowed to less than 1% in the most last quarter of 2012 quarter. It seems like a good time to take a step back, assess the current economic outlook, and see what it means for the business in Ohio.
Budget problems remain the major obstacle to faster growth. The fiscal cliff deal did reduce the deficit but it was really small. Part of the large current deficit is result of a weak economy and increased spending by the government. Moreover, if the economy were growing at its historical average rate of 3.25% a year, the U.S. could afford to run a deficit. the increase GDP in the first quarter of 2013 could be as good as it gets for the year as businesses and consumers begin to feel the impacts of the sequester and the expiration of the payroll tax cut. The futures estimates are for slightly slower growth this year – an estimated 1.8%, down from 2.2% in 2012. This would be a small improvement in growth this year, followed by 3% or more in 2014. While that would get the economy back to its long-term average growth rate, it would remain far short of the rebound that normally follows a recession.
Primary Economic factors comparing US and Ohio are below. GDP. US economy is producing more goods and services than before the recession began. In the final three months of 2007, it produced an annual rate of $13.3 trillion in goods and services, a record high. That figure had shrunk to $12.7 trillion when the recession ended. It then began to recover. The U.S. gross domestic product, the broadest gauge of production, regained its previous peak by the end of 2011. And in the first three months of 2013, the GDP was $13.75 trillion. Ohio’s economy contracted more sharply than the national economy in 2008 and 2009, but now is rebounding at a respectable pace, Ohio change in real GDP was 2.1% compared to National change of 1.5% and Ohio’s economy is forecast to match the pace of the national recovery in 2013. Ohio is expected to gradually close the gap between the state’s output level and the national trend in output. Unemployment. For the past three years, unemployment has been coming down slowly but steadily.
The unemployment rate has been below 8% since September 2012, down from the recession high of 10% in October 2009. The most recent data showed it was at 7.6% March 2013, the lowest rate in four years. While the labor market is healing from the Great Recession, the high rate of long-term unemployment continues to pose a significant challenge for workers and the economy. Significantly faster job creation would be needed to bring unemployment down to historical average of 6%. The steady drop in the state’s unemployment rate is a sign the economy is growing faster. Currently Ohio unemployment rate is 7.1% which is relatively lower than the National Average of 7.6%. In Ohio, over two-thirds of manufacturing employment is in production of durable goods, such as machinery, motor vehicles and steel. Ohio also has a higher concentration of employment in manufacturing than most other states. The downside to having generally high-paying manufacturing jobs is that they are more negatively impacted by business cycles.
Ohio’s manufacturing industry has experienced downsizing, plant closings and restructuring, and as such manufacturing employment is projected to continue trending downward. The greatest employment loss occurred in manufacturing which lost jobs at an average annual rate of 3.9%. Service-providing industries will account for almost all of the job growth in future with construction is the only goods-producing industry expected to add jobs. Industrial Production. Industrial production in the United States increased 3.50 percent in March of 2013 over the same month in the previous year. Industrial Production in the United States is reported by the Federal Reserve. Historically, the United States Industrial Production averaged 3.91 Percent. In the United States, industrial production measures the output of businesses integrated in industrial sector of the economy such as manufacturing, mining, and utilities while in Ohio Industrial production in Manufacturing sector continue to decline manufacturing jobs is expected to fall.
Inflation. Current annual inflation is between zero and 2%, Consumer prices have risen only 1.8% over the past 12 months. Federal Reserve policy of quantitative easing worked keeping the prices low. Only trouble is, the money supply has been tripled in the process, which could spur inflation if the economy ever starts growing robust. Ohio state inflation is expected to follow the national average. Home Prices & Stock Market. The real estate market continues to move up, and further improvement is likely as unemployment comes down. But home prices remain far below their previous highs. Americans lost $16 trillion in wealth during the recession, mainly because home values and stock prices sank. Those losses have now been reversed. Household “net worth” reached $66.1 trillion in the final three months of 2012, according to the Federal Reserve. That was just 2 percent below the peak reached in the fall of 2007.
And steady increases in stock prices and home values so far this year have allowed Americans as a whole to regain all their lost wealth, though many individual families have yet to recover. While in Ohio the median sales prices of existing single-family homes in Ohio’s six largest metropolitan are below the medians of both the United States and the Midwest region. While home prices in Ohio declined at a slower rate compare to US. Per-Capita income. Ohio’s Per Capita income remains below U.S. average. The gap between Ohio’s per capita income and the U.S. average has widened over the years, increasing from less than 3 percentage points below in 1981 to over 9 percentage points below in 2011 and this gap is excepted to wide with the declining manufacturing sector.
Overall, the US and Ohio economy are slowly improving currently the GDP growth in a recovery or expansion phase. The bad news is that this has been the weakest rebound and Growth has been hobbled by the damage from a housing bust and financial crisis. Business are affected by the recession stage of the business cycle, some businesses were more vulnerable like manufacturing to changes in the business cycle than others, currently most of the business are back with increasing capacity and job growth number are up, The cost of production for a companies will increase as the cost of goods and services will increase as raw materials and other resources become expensive as economy improves.
The demand and supply scale is ever changing in an economy which directly affects the businesses. Economic conditions impact all businesses, though small businesses often feel the effect of economic changes faster than their larger business. Upswings in the economy typically provide a rush of new or expanded business opportunities for small operations, whereas a downward economic cycle can have a severe and lasting impact. Currently all businesses are in a recovery mode. Disposable incomes are increasing, unemployment is getting low and consumer confidence is increasing prompting people to pump their money back into the economy through the purchase of essential and nonessential goods and services. But there are the some international risks that have existed for more than a year like Economic turmoil in China, the euro currency crisis which could disrupt the global economy and in turn could hurt growth worldwide and indirectly effect US and Ohio economy. But overall the economy is expected for a strong rebound in coming years.
3. http://articles.chicagotribune.com/2013-01-13/business/sns-rt-us-usa-fed-evansbre90d019-20130113_1_fed-s-evans-monetary-policy-policy-setting-panel 4. http://articles.marketwatch.com/2013-01-11/economy/36268824_1_trade-deficit-gdp-growth-trade-gap 5. http://www.scpr.org/blogs/economy/2013/01/04/11835/december-jobs/ 6. http://www.nber.org/cycles/recessions.html
7. http://www.jec.senate.gov/public//index.cfm?a=Files.Serve&File_id=85d7f40a-e4dd-4452-9df9-5a116e061d4e 8. http://www.daytondailynews.com/news/news/ohios-2013-economy-expected-to-grow-