Personal Disposable Income
The US personal disposable income has gradually been increasing since 1947. The graph from FRED Economic Data indicates that in 1947, the nation paid an average of $16,069 disposable income to middle income earners annually and this steady improved and by 1965, the average rate of income for the middle-income individuals was about $20,000. This was due to the October 1949– July 1953 economic expansion that resulted in 17.7% increase in employment and a 4.4% increase in economic growth. The income continued to rise until 1975 when it recorded an annual rate of approximately $25,000 before it started dropping. The drop was due to the July 1953 – May 1954 recession period that lasted for three years and nine months and culminated into a negative economic growth of 2.6% (FRED Economic Data, 2017). By 1981, the disposable income for the middle-income individual had gone back to $ 20,000 annually. The rate stagnated for about two years, and in 1983, it began to rise.
The December 1982–July 1990 expansion attributes to this. Employment rate grew by 23.7%, and the economic growth rose by 2.9%. This was a steady improvement, and by 1990, it had reached a rate of about $26,000. This became stagnant for a period of around six years. In 1996, it increased steadily. In 2000, the wage was about $27,000. In 2004 and 2005, it steadily increased but dropped from 2007 due to the Great Recession. By 2014, the annual disposable income for the middle-income earners was $26,989. The great depression of December 2007 – June 2009 was responsible for the personal disposable income. This recession period resulted in the negative economic growth of 5.1%.
Business cycles have been in existence since ancient times. In the Bible, business cycles are also evident. This is seen when Joseph interpreted Pharaoh’s dream and said that there would be seven years of abundance followed by seven years of famine. For this reason, Pharaoh was advanced to store surplus grain, and this proved to be significant when the recession period hit the world. The US business cycles are characterized by alternating fluctuations of expansion and contraction. The expansion period has the high economic activity while contraction period is demonstrated by reduced economic activities. According to the National Bureau of Economic Research (NBER), it is evident that when I was born, the economy was undergoing an expansion. Here, the nation was recording tremendous improvements in employment rates, industrial production, and sales. The personal income of people was significantly increasing. However, the economy had not reached the peak period but slowly rising from the recession period. This was a similar case when my parents were born.
Currently, the economy of US is at the expansion phase. It is healthy and growing at the rate of 2% or 3% and people are investing in stocks. This has been the case since June 2009 after the 2007/2008 recession period. Historically, the expansion phase lasts for a least five years while the highest contraction period takes around 6 years. Starting 2007, the US economy was moving from a peak period to a recession. The asset bubbled and saw the housing sector crumble due to mortgages. The economy contracted and the rate of unemployment increased. The US last business cycle period occurred from 2007 to 2009, and it is known as the Great Recession. This period was characterized by economic declines and it was one of the worst the world global recession after the Great Depression that occurred in the 1930s.
The US was the major cause of this global recession, and it was particularly linked to failures in the real-estate market. In the US, it began in the December 2007 and ended in June 2009. Thus, it extended for a period of 19 months. It was also connected to the 2007/2008 financial crisis and subprime crisis. As a result, asset availability was scarce and led to the collapse of the financial sector that saw the closure of commercial banks. The longest economic expansion in the US took place from March 1991 to March 2001 lasting a period of 120 months. According to National Bureau of Economic Research, the employment rate in the country grew by 22.5% and recorded an annual growth of 2.1% (National Bureau of Economic Research, 2017). However, the worst depression to ever hit the nation occurred in since March 1815 to 1821 and lasted for a period of six years. This was shortly after the war ended and the US entered into a period of financial panic and financial constraint. Inflation rose and banks closed down resulting in a financial crisis, unemployment, low economic growth and collapse of the real estate market.
Economic growth is the increase in the economy’s capacity to produce goods and services in a given period of time. Economic growth is measured in nominal terms or reals values. The real measurement of economic growth is adjusted for inflation. Conventionally, aggregate economic growth is calculated regarding the gross national product (GNP) or regarding the gross domestic product (GDP) (Jones, 2015). There are various ways to facilitate economic growth. Discovery of new and better economic resources such as gasoline and growth in the labor force lead to economic growth. Creation of a superior technology also facilitates the growth of the economy, and the rate of capital and technical growth is dependent on the rate of investment and savings in the economy. Economic growth could also be facilitated through encouraging specialization and reducing the rate of interest rates to encourage borrowing.
Economic growth is significant to a country in a number of ways. First, it elevates the standards of living and thus promotes better living in people. It reduces poverty levels in a nation as well as lead to a decrease in the rate of unemployment in a nation. It leads to specialization, and a country is able to cater for its social programs. The US economy is currently doing well in economic development compared to other nations. For the past three years, it has recorded a high economic growth. The nation is currently encouraging investment into the private sector to boost the e economic growth. The rates of interest rates have been reduced to boost borrowing. Also, it has revised it taxes to and made conducive environment for foreign direct investment. The US remains to be the largest country in nominal GDP and the fasted growing economy in the world (Jones, 2015). China and Japan come in as second and third respectively.