Friday, August 5, 2011

Recession


The largest economy of the world is at the high risk of encountering a fresh recession as indicated by the Friday’s payroll data that dominated the global financial markets.
With the U.S. economy continuously getting weak and even the debt crisis in Europe is also making the continent’s economy hollow, the monthly payroll reports have become the major topic of concern.
A great hike in U.S. payrolls has been observed since June.
The payroll report will be made available to the top policymakers at the Federal Reserve on Tuesday and it is believed that even they will not be able to suggest any effective measure to strengthen recovery.
Interest rates have been cut down to zero and $2.3 trillion has been spent on bonds by the U.S. central bank to bring back the country’s economy on path.
The rise in anticipated jobs during June was the minimum since September, 2011 and July’s growth also might not convince investors.
July employment report will be released at 8:30 a.m. (1230 GMT) by the U.S. Department of Labor.
SLUGGISH GROWTH OBSERVED IN U.S.
The first six months of 2011 has slowed down the U.S. growth. In the first quarter, there was only 0.4% rise in gross domestic product but in the second quarter it has goit some pace and rose to 1.3%.
Economists said that private payroll growth dropped to 65,000 in May and June from 230,000 in March and April.
A conflict is going on between Republicans and Democrats over increasing debt ceiling of the country and that has been a headache for consumers and employers.
Acceleration in non-farm employment was observed in private sector during July when non-farm employment rose from 57,000 in June to 115,000 in July. This is just a small recovery in the 8 million jobs lost during the recession.
It was expected that government payrolls have plunged by around 30,000 in the month of July. But further drop may occur as a result of recent shutdown in Minnesota by the government leaving behind large number of state workers without paychecks.
Private sector is still bearing the burden of creating more jobs even after alarming budget cuts in the government sector.
Also, the large decline in import of auto parts from Japan after tsunami and earthquake hit the Japan in March lead many auto manufacturers to shutdown their plants as it is expected to add to gain of 6,000 attained in June.

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