Essay described 10 different economic indicators that are important to the US Economy. It
is a snapshot of what the economy looked like in 2013 using those indicators. As well there
is a section on the economy of South Korea in 2013.
Question 1
Productivity and Costs
The Productivity and Costs indicator measures the relationship between labor inputs within
production and the real outputs associated with those inputs. It directly correlates with how
efficient the economy is behaving at different points in time. In order to have long-term
economic growth, consistent increases in productivity are needed. It measures corporate
profitability by looking at unit labor cost growth, which is important because that
profitability adds to GDP. One downside is this indicator is only released quarterly, but
because it is quarterly, the information within is more valuable. In 2013 Quarter 1,
Nonfarm business productivity rose 0.5% from last quarter. This means that more output is
being exerted by the labor force so in turn the labor costs would be down which they are,
they are down 10% this quarter compared to last quarter. Over the past year productivity
has increased by 0.9%. This indicator also tells us something about how manufacturing is
doing. Manufacturing came in strong with productivity growth of 3.5% in quarter 1.
Productivity reflects efficiency, in this case in the economy. Looking to the future,
compensation will be the same as it always has been. Little to no growth because growth
usually is attributed to increases in benefits, but those increases in benefits just is not
happening. The unit labor costs will continue to stay low due to the amount of workers
available and the competition that in sues.
Personal Income
Income received by households from employment/self-employment, transfer payments,
and investments make up the personal income indicator. It measures these different
incomes and combines them into one. Wages and salaries from employment make up the
largest part of personal income. Included within personal income is disposable income,
which is the personal income left over after the payment of income, estate, certain other
taxes, and payments to the governments. Why is Personal Income important? It allows us
to predict future consumer spending patterns. We are able to see how much disposable
income the population has, and that will correlate with future consumer spending. Also we
can see the amount people are saving. The difference in income saved between income and
their spending will allow us to see their savings, which leads to an indicator of consumer
credit quality. Consumer spending makes up over two-thirds of GDP, so this indicator is
very important. If consumer spending begins to slow down, GDP will potentially decline
and if it is bad enough may send the US into a recession. From March to April personal
income fell by less than 0.1%. Savings stayed at 2.5% in April from last month.
Consumption was down in April by -0.2%. If we look at it on a yearly basis the results are
more positive. Personal income increased by 2.8% and consumption also increased by
2.8%. The two should be the same but are sometimes skewed by missing information.
Looking forward, moderation in spending growth will be involved in the short term.
Previous Federal fiscal cuts will continue to affect job growth but will likely stop affecting
job growth by fall. Once the summer has passed, corporate profits will trickle down and
begin to be used which will contribute to PI. Late in the year is when the growth is
expected to start.
Industrial Production
Industrial Production is a measure of output in the industrial part of the US economy. It
does not take into account price swings. The Federal Reserve collets data on 312 different
industrial components representing mining, manufacturing, and the electric and gas
industries for this index. It is a leading indicator and every change in industrial output
correlates with GDP growth. Inflation is not a part of the measurements because it does not
take in account the price of goods. It is measured by both type of product and by industry.
When there is strong industrial production there is growth in GDP and when there is weak
industrial production there is less growth in GDP. Within manufacturing is the automotive
industry which is the most sensitive part of manufacturing. Because the auto industry
entails so much production, it has a huge impact on the overall industrial production
measure for the period. From March to April industrial production fell by 0.5%. Overall
industrial production was weaker than expected in April. All and all for the last year there
has not been any drastic growth or decline in the industrial production index. That being
said it is helping the economy stay at a stable pace. The stall in production growth is
contributed largely by the moderation in auto production because auto production is such a
huge part of industrial production. Looking to the future, this trend of slowness in
production and stalling in growth shall continue mildly until consumer spending pick up
later in the year, and then we shall see growth in industrial production.
ADP National Employment Report
The ADP National Employment Report also know as the Jobs Report provides an estimate
of nonfarm payroll employment from month to month. It basically tells us how many jobs
were added in the US from the previous month. The report is derived from about 500,000
private establishments in the US which the ADP processes payrolls for. This accounts for
about 20% of all US private sector workers. It provides us a view of the overall view of the
