USA - Stage 3 On Economic Cycle Spectrum

[Economy 52,882]

http://www.thestreet.com/story/13198752/1/why-the-us-economy-wont-fall-into-recession-anytime-soon.html

 

Ok so for those of you who dont understand economy well, ill try to really simplify the typical economic cycle in stages

 

Stage 1 (Recession): The economy just came out of a recession. Unemployment is high, wages low, demand for goods and services low, inflation is weak

Stage 2 (Initial-Recovery): Consumer Demand rebounds after economy stops contracting and sales rise and corporate profits rise. At this stage hiring is still moderate because factories still have enough production capacity to service demand without needing extra hiring and investment in equipment etc

Stage 3 (Acceleration): demands for services and goods has now reached a point that there is no spare capacity in most businesses so they must hire more people and invest to get more equipment. At this stage inflation begins to rise as there's more demand for goods and lower unemployment starts to lead to higher wages

Stage 4 (Full-Capacity): This is where the economy has reached its full capacity to produce sustainably given size of productive labor force and its consumption capacity. Unemployment has fallen to a low level and most businesses are running at full capacity. The economy is functioning as efficiently as it can

Stage 5 (Over-Heating): Once the economy hits full capacity if economic growth continues, you may hit a labor shortage, resulting in a sharp rise in inflation. There may also be over-consumption of goods and people over-spending a lot of money. Homes and cars may also be built at an unsustainable rate setting up the phase for the next economic bust. Higher interest rates may reduce excessive inflation and economic over-heating.

 

According to a--lysis we are somewhere in stage 3. Hiring and investment has accelerated and the first signs of wage growth and uptick in inflation are begging to be seen though a rising currency is partially offsetting that

[HausAlly 799]

thats great right, people will have jobs then spend their wages and it all goes round in a circle idk much about how americas economics have been lately 

[Economy 52,882]

thats great right, people will have jobs then spend their wages and it all goes round in a circle idk much about how americas economics have been lately 

of course the strength of the cycle is influenced by Government policies and even other Countries... its not a perfect circle because it doesnt happen exactly the same everytime

 

How low the lows are and how high the highs are, and how long they last etc is influenced by many things

 

This is a general layout of a typical economic cycle but how predominant each part of the cycle is does in fact greatly rest with a number of different things

 

Were at a point now where since weve already began good hiring levels (200K or more most months for the past 12-18 months) unemployment has fallen enough to start raising wages and inflation

 

We wanna be careful tho how long we leave interest rates low though. As the economy tightens its spare capacity, if we do not tighten monetary capacity with it, it can cause all sorts of imbalances such as economic growth that isnt sustainable, or undesirably high inflation further down the road