Can the U.S. Economy Recover?

The U.S. economy seems to be lurching back and forth between growth and contraction, but is true recovery around the corner? With continuing turmoil around the world, it is looking like the recovery may be further away than originally expected.

But weren’t things looking up for a while?

At the start of 2011, optimism was high that we would see an economic upswing in the U.S., but those hopes were dashed by a combination of various factors, including:

• The Euro Zone debt crisis
• Spiking oil prices as a result of the Arab Spring
• Persistent unemployment
• The tsunami in Japan

Overall, 2011 turned out to be an extremely turbulent year on the world stage with natural disasters, political turmoil and domestic problems leading to the unfortunate reality that, despite high hopes, the U.S. economy was not going to see the recovery many had hoped for.

Even Americans themselves are growing doubtful. A survey from business advisory firm Alix Partners found that 61 per cent of Americans don’t expect to see a return to the lifestyle they enjoyed before the recession began in 2008 until after 2014 — and even then it is no sure thing. Ten percent said they don’t believe the economy would ever be as strong as it was before the global financial crisis hit.

How did the economic crisis begin?

It is widely believed that the financial crisis in the U.S. began as a result of competition between lenders for revenue and market share. This competition led to a lowering of underwriting standards and risky lending.

It wasn’t just in America where things started to go wrong. The bad news was everywhere. The Euro Zone, once so prosperous, began to fall apart as the fiscal situations of its member countries such as Greece, Spain, Portugal and Italy began to decline. Austerity measures have been introduced in some countries, such as Germany, while others, such as France, have rejected such measures.

Since the Euro market is important for exports from the U.S., the recession there has dented growth prospects locally, meaning American exports have become less competitive.

But what about developing countries? Won’t they help?

It is true that the economies of developing countries such as China, Brazil and India are growing faster than anywhere else in the world, but even they are starting to hit headwinds. In China, its three economic cornerstones of exports – housing, construction, and infrastructure development are all slowing down. Housing prices are slipping as well. It seems that even China is not immune to the effects of the crisis.

Is there any good news for the U.S. economy?

There is. The U.S. economy has been creating more jobs despite the odds being stacked against it, and domestic spending has increased as well. Many point to these factors as positives that may mean the recovery of the U.S. economy is just around the corner.

Additionally, more U.S. residents are taking an interest in the economy; in fact, this is a trend that is being mirrored around the world, with an increased interest in share trading and Forex trading courses contributing to a more knowledgeable population. As the U.S. heads towards an uncertain future, there’s no doubt that the more its population is clued in about the economy and its workings, the quicker and more successful the eventual recovery will be.