US Economic Headwinds Report

This report analyzes the economic headwinds facing the United States since late 2016. Key factors discussed include disappointing job growth and a declining labor force participation rate, moderate inflation, sluggish GDP growth (the lowest since World War II), and imbalances in GDP expenditure leading to increased debt and deficits. The report examines the impact of these factors and explores potential fiscal and monetary policy responses. The analysis highlights the challenges posed by unsustainable levels of federal debt and the strain on social security and Medicare programs. The report concludes by discussing the difficult choices facing policymakers in addressing these issues, weighing the potential consequences of various approaches.

Economics

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Contents
Introduction..............................................................................................................................................2
Unemployment and Labor Participation rate...................................................................................2
Inflation rate.............................................................................................................................................3
Declining growth of GDP......................................................................................................................4
Imbalances of components of GDP expenditure leading increased debts and deficits.......6
Fiscal and Monetary Measures...........................................................................................................7

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Introduction
In today's era, it is impossible to think about any important business presentation such
as on earnings reports, sales turnovers, revenue reports without the use of the term
“headwinds” by the businesses. From the point of view of aviation, a headwind is a wind
that pushes back against the front of the aircraft in contrast to a tailwind that accelerates
an economy. So if we talk about the business definition of headwind, it would imply all
the situation or conditions that make the growth prospects much harder. Since the end
of 2016, the United States is facing sluggish economic growth and still is experiencing
major obstacles in efforts to boost full level recovery of the economy due to the following
factors. . The problematic trends in the United States may lead to inappropriate spill-
over effects on the overall global economy (TRADING ECONOMICS | 300.000
INDICATORS FROM 196 COUNTRIES, 2017).
Unemployment and Labor Participation rate
In 2016, U.S. job growth has been disappointing. As per the monthly nonfarm payroll,
(NFP) report in December 2016 stated a little of 38,000 non-agricultural jobs added in
January 2017, much lower than the expected 162,000. The unemployment rate has
been reported at 4.7% It is very important for the policy makers to take into
consideration the labor force participation, as the official unemployment rate can be a
misleading indicator to get an idea of economic recovery (Zero Hedge | On a long
enough timeline the survival rate for everyone drops to zero, 2017).

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Labor force participation rate which implies the share of civilians of America over the
age of 16 who are either working or looking out in the search of the job. Labor-force
participation rate has dropped exceptionally after 2008 financial crisis and the Great
recession (Business Insider, 2017)
Recession had put millions of Americans to the sidelines, discouraging them to even
look for the work As per February 2017, the labor force participation rate ticked down to
62.7% from 62.8% in October.
Inflation rate

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Inflation is one of the reason which causes stress to the policy makers, investors as well
as the citizens of any country. Many economist suggest that moderate inflation is
mandatory for the US economy th thrive in the competitive world, however, a high rate
inflation prevents the economic participants to play actively in the market leading to a
slowdown of the economic stance. Cureently, U.S. is facing an inflation rate of 2.4% as
per the estimations of March 2017. These rates of inflation are calculated on the basis
of latest Consumer Price Index on the monthly basis as published by the Labor
department’s Bureau of Labor Statistics.
Figure 1 Inflation rates
Declining growth of GDP
Economic growth in U.S. and the world economies has been negatively affected since
2010 to 2016. In the last 6 years , to be precise after the end of recession, the economic
growth in the United States has averaged only 2 percent annually. This has been the
lowest threshold economic growth since World War II.

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Productivity growth falls are nearly to zero in 2016 after very hopeless results of lesser
than 1% growth since 2010 till now (TRADING ECONOMICS | 300.000 INDICATORS
FROM 196 COUNTRIES, 2017).
Productivity in the United States averaged 62.34% Index points since 1950 to 2016.
Output per worker increased to 2.4% and hours worked rose 1 percent (Business &
Financial News, U.S & International Breaking News | Reuters., 2017).
Figure 2 Growth trends in GDP
. The economies of U.S., Japan, and Europe faced secular stagnation where there was
neither magnificent growth nor substantial fall in the output. A coordinating view
believed that the main source of the neutral data of economic growth lies in the pattern
of productivity growth. In the time of recovery, the data on the growth of the productivity
showed a clear tendency of decline. Productivity growth falls are nearly to zero in 2016

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after very hopeless results of lesser than 1% growth since 2010 till now The
consequences of slower economic growth at aggregate levels, slower employment
growth, lower growth in wage and lesser aggregation of wealth followed. (Search,
2017).
Imbalances of components of GDP expenditure leading
increased debts and deficits
The U.S budget deficit has increased to $587 billion for the fiscal year 2016 on slower
than expected revenues and higher spending for programs including Social security and
Medicare as per treasury department approximations for 2016. When accounting for
calendar adjustments, September would have shown a $75 billion surplus compared
with an adjusted $91 billion surplus in the same month a year ago. The non-partisan
Congressional Budget Office has repeatedly warned that increasing federal debt levels
due to larger spending and lesser revenues are unsustainable over the long term unless
Congress changes current laws. And recently, the US $700 billion bank bailout at the

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beginning of the 2008 financial crisis was equivalent to 4.8% of GDP. So, these people
managed to increase the national debt by a larger percentage than the cost of the New
deal (Databases, Tables & Calculators by Subject, 2017).
Fiscal and Monetary Measures
Social Security programs and the Medicare programs have consumed the majority of
U.S tax revenue, forcing the government to borrow huge amounts of money so as to
finance these operations. These programs are not even properly financed and both are
rapidly facing inadequacies in monetary terms. The annual trustee reports of the
program have shown that their primary trust finances will become completely exhausted
starting in the next few years. So even though, these programs are already draining
resources of taxpayers and forcing the government to take on more and more debt, so
they are in need to be urgent elimination (fiscal contraction)
Even if government undertake the possibility of printing money(monetary expansion), it
would either lead to a never-ending crisis of currency or force the US government to
make defaults on expensive interest payments through the financial system in chaos.
The other option could have been to simply default on future beneficiaries of these
programs. But that would highly endanger the sustainability of the economy by wasting
up all the money reserves in present day and leaving nothing for the future generations.

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REFERENCES
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Reuters. Retrieved 16 April 2017, from http://www.reuters.com
Business Insider. (2017). Business Insider. Retrieved 15 April 2017, from
http://www.businessinsider.com
Databases, Tables & Calculators by Subject. (2017). Bls.gov. Retrieved 16 April 2017,
from https://www.bls.gov/data
Search. (2017). Congressional Budget Office. Retrieved 16 April 2017, from
https://www.cbo.gov/publication
Tensions, N., U.S., A., Vote, F., California, A., Passover, T., & Confidence, E. (2017).
The Wall Street Journal & Breaking News, Business, Financial and Economic News,
World News and Video. The Wall Street Journal. Retrieved 16 April 2017, from
https://www.wsj.com
The Balance. (2017). The Balance. Retrieved 16 April 2017, from
https://www.thebalance.com
TRADING ECONOMICS | 300.000 INDICATORS FROM 196 COUNTRIES. (2017).
Tradingeconomics.com. Retrieved 15 April 2017, from
http://www.tradingeconomics.com
U.S. Government Accountability Office (U.S. GAO). (2017). Gao.gov. Retrieved 16 April
2017, from https://www.gao.gov

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Zero Hedge | On a long enough timeline the survival rate for everyone drops to zero.
(2017). Zerohedge.com. Retrieved 16 April 2017, from http://www.zerohedge.com