The economy of the United States

New York Stock Exchange on Wall Street in New York, New York, United States. Español: Bolsa de Nueva York en Wall Street en Nueva York, Nueva York, en los Estados Unidos. 

The economy of the United States is the world's largest single national economy. The United States' nominal GDP was estimated to be $16.62 trillion in 2012,^[1] approximately a quarter of nominal global GDP.^[2] Its GDP at purchasing power parity is also the largest of any single country in the world, approximately a fifth of the global total.^[2] The United States has a mixed economy^[22][23] and has maintained a stable overall GDP growth rate, a moderate unemployment rate, and high levels of research and capital investment. Its five largest trading partners are Canada, China, Mexico, Japan, and Germany.

The US has abundant natural resources, a well-developed infrastructure, and high productivity.^[24] It has the world's sixth-highest per capita GDP (PPP).^[2] The U.S. is the world's third-largest producer of oil and second-largest producer of natural gas. It is the second-largest trading nation in the world behind China.^[25] It has been the world's largest national economy (not including colonial empires) since at least the 1890s.^[26] As of 2010, the country remains the world's largest manufacturer, representing a fifth of the global manufacturing output.^[27]

 

Of the world's 500 largest companies, 132 are headquartered in the US, twice that of any other country.^[28] The country is one of the world's largest and most influential financial markets. About 60% of the global currency reserves have been invested in the US dollar, while 24% have been invested in the euro. The New York Stock Exchange is the world's largest stock exchange by market capitalization.^[29] Foreign investments made in the US total almost $2.4 trillion, which is more than twice that of any other country.^[30] American investments in foreign countries total over $3.3 trillion, which is almost twice that of any other country.^[31] Consumer spending comprises 71% of the US economy in 2013.^[32] The labor market has attracted immigrants from all over the world and its net migration rate is among the highest in the world. The U.S. is one of the top-performing economies in studies such as the Ease of Doing Business Index, the Global Competitiveness Report,^[33] and others. The US is ranked first globally in the IT industry competitiveness index.^[34]

 

The US economy is currently embroiled in the economic downturn which followed the Financial crisis of 2007–2008, with output still below potential according to the CBO^[35] and unemployment still above historic trends.^[36] As of March 2013, the unemployment rate was 7.6% or 11.7 million people,^[37] while the government's broader U-6 unemployment rate, which includes the part-time underemployed, was 13.9%.^[38] With a record proportion of long term unemployed, continued decreasing household income, and new federal budget cuts, the US economy remained in a jobless recovery.^[39] At 11.3%, the U.S. has one of the lowest labor union participation rates in the OECD world.^[40] Extreme poverty in the United States, meaning households living on less than $2 per day before government benefits, doubled from 1996 levels to 1.5 million households in 2011, including 2.8 million children.^[41] The wealthiest 10% of the population possess 80% of all financial assets.^[42]

Total public and private debt was $50.2 trillion at the end of the first quarter of 2010, or 3.5 times GDP.^[43] In October 2012, the proportion of public debt was about 1.0043 times the GDP.^[44] Domestic financial assets totaled $131 trillion and domestic financial liabilities totaled $106 trillion.^[45] The US economy is regularly reviewed with comprehensive economic data analysis in the Beige Book^[46] of the Federal Reserve System,^[47] the Bureau of Economic Analysis of the Department of Commerce,^[48][49] the Bureau of Labor Statistics^[50] of the Labor Department and economic indicators^[51] of the US Census.

World's largest economy

The United States has been the world's largest national economy since at least the 1920s.^[26] For many years following the Great Depression of the 1930s, when danger of recession appeared most serious, the government strengthened the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. Ideas about the best tools for stabilizing the economy changed substantially between the 1930s and the 1980s. From the New Deal era that began in 1933, to the Great Society initiatives of the 1960s, national policy makers relied principally on fiscal policy to influence the economy.

 

The approach, advanced by British economist John Maynard Keynes, gave elected officials a leading role in directing the economy, since spending and taxes are controlled by the U.S. President and the Congress. The "Baby Boom" saw a dramatic increase in fertility in the period 1942–1957; it was caused by delayed marriages and childbearing during depression years, a surge in prosperity, a demand for suburban single-family homes (as opposed to inner city apartments) and new optimism about the future. The boom crested about 1957, then slowly declined.^[56] A period of high inflation, interest rates and unemployment after 1973 weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity.^[57]

 

The US economy grew by an average of 3.8% from 1946 to 1973, while real median household income surged 74% (or 2.1% a year).^[58][59] The economy since 1973, however, has been characterized by both slower growth (averaging 2.7%), and nearly stagnant living standards, with household incomes increasing by 10%, or only 0.3% annually.^[60]

The worst recession in recent decades, in terms of lost output, occurred during the 2008 financial crisis, when GDP fell by 5.0% from the spring of 2008 to the spring of 2009. Other significant recessions took place in 1957–58, when GDP fell 3.7%, following the 1973 oil crisis, with a 3.1% fall from late 1973 to early 1975, and in the 1981–82 recession, when GDP dropped by 2.9%.^[61][62] Recent, mild recessions have included the 1990–91 downturn, when output fell by 1.3%, and the 2001 recession, in which GDP slid by 0.3%; the 2001 downturn lasted just eight months.^[62] The most vigorous, sustained periods of growth, on the other hand, took place from early 1961 to mid-1969, with an expansion of 53% (5.1% a year), from mid-1991 to late in 2000, at 43% (3.8% a year), and from late 1982 to mid-1990, at 37% (4% a year).^[61]

In the 1970s and 1980s, it was popular in the U.S. to believe that Japan's economy would surpass that of the United States, but this did not happen.^[63]

Slower growth since the early 1970s

Since the 1970s, several emerging countries have begun to close the economic gap with the United States. In most cases, this has been due to moving the manufacture of goods formerly made in the U.S. to countries where they could be made for sufficiently less money to cover the cost of shipping plus a higher profit.

In other cases, some countries have gradually learned to produce the same products and services that previously only the U.S. and a few other countries could produce. Real income growth in the U.S. has slowed.

The North American Free Trade Agreement, or NAFTA, created the largest trade bloc in the world in 1994.

 

Since 1976, the US has sustained merchandise trade deficits with other nations, and since 1982, current account deficits. The nation's long-standing surplus in its trade in services was maintained, however, and reached a record US$195 billion in 2012.^[9] In recent years, the primary economic concerns have centered on: high household debt ($11 trillion, including $2.5 trillion in revolving debt),^[64] high net national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage debt (over $15 trillion as of 2005 year-end), high external debt (amount owed to foreign lenders), high trade deficits, a serious deterioration in the United States net international investment position (NIIP) (−24% of GDP),^[65] and high unemployment.^[66] In 2006, the U.S. economy had its lowest saving rate since 1933.^[67] These issues have raised concerns among economists and national politicians.^[68]

 

The United States economy experienced a crisis in 2008 led by a derivatives market and subprime mortgage crisis, and a declining dollar value.^[69] On December 1, 2008, the NBER declared that the United States entered a recession in December 2007, citing employment and production figures as well as the third quarter decline in GDP.^[70] The recession did, however, lead to a reduction in record trade deficits, which fell from $840 billion annually during the 2006–08 period, to $500 billion in 2009,^[61][71] as well as to higher personal savings rates, which jumped from a historic low of 1% in early 2008, to nearly 5% in late 2009. The merchandise trade deficit rose to $670 billion in 2010; savings rates, however, remained at around 5%.^[72]

 

The U.S. public debt was $909 billion in 1980, an amount equal to 33.3% of America's gross domestic product (GDP; by 1990, that number had more than tripled to $3.2 trillion – or 55.9% of GDP.^[73] In 2001 the national debt was $5.7 trillion; however, the debt-to-GDP ratio remained at 1990 levels.^[74] Debt levels rose quickly in the following decade, and on January 28, 2010, the US debt ceiling was raised to $14.3 trillion.^[75] Based on the 2010 U.S. budget, total national debt will grow to nearly 100% of GDP, versus a level of approximately 80% in early 2009.^[76] The White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019,^[77] up from $202 billion in 2009.^[78]

The U.S. Treasury statistics indicate that, at the end of 2006, non-US citizens and institutions held 44% of federal debt held by the public.^[79] China, holding $801.5 billion in treasury bonds, is the largest foreign financier of the record U.S. public debt.^[80]

US share of world GDP (nominal) peaked in 1985 with 32.74% of global GDP (nominal). Its second highest share was 32.24% in 2001.
US share of world GDP (PPP) peaked in 1999 with 23.78% of global GDP (PPP). While its share has been declining each year since 1999, it is still the highest in the world.

Overview

 

Business culture

A central feature of the U.S. economy is the economic freedom afforded to the private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces.^{[81][broken citation][neutrality is disputed]} This is enhanced by relatively low levels of regulation and government involvement,^{[82][dead link]} as well as a court system that generally protects property rights and enforces contracts. Today, the United States is home to 29.6 million small businesses, 30% of the world's millionaires, 40% of the world's billionaires, as well as 139 of the world's 500 largest companies.^{[28][83][84][85]}

From its emergence as an independent nation, the United States has encouraged science and innovation. As a result, the United States has been the birthplace of 161 of Britannica's 321 Great Inventions, including items such as the airplane, internet, microchip, laser, cellphone, refrigerator, email, microwave, personal computer, LCD and LED technology, air conditioning, assembly line, supermarket, bar code, electric motor, ATM, and many more.^[86]

 

The United States is rich in mineral resources and fertile farm soil, and it is fortunate to have a moderate climate. It also has extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent and the Great Lakes—five large, inland lakes along the U.S. border with Canada—provide additional shipping access. These extensive waterways have helped shape the country's economic growth over the years and helped bind America's 50 individual states together in a single economic unit.^[87]

The number of workers and, more importantly, their productivity help determine the health of the U.S. economy. Consumer spending in the US rose to about 62% of GDP in 1960, where it stayed until about 1981, and has since risen to 71% in 2013.^[32] Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon that is both cause and effect of almost constant economic expansion. Until shortly after World War I, most workers were immigrants from Europe, their immediate descendants, or African Americans who were mostly slaves taken from Africa, or their descendants.^[88]

Demographic shift

Beginning in the late 20th century, many Latin Americans immigrated, followed by large numbers of Asians after the removal of nation-origin based immigration quotas.^[89] The promise of high wages brings many highly skilled workers from around the world to the United States, as well as millions of illegal immigrants seeking work in the informal economy. Over 13 million people officially entered the United States during the 1990s alone.^[90]

 

Labor mobility has also been important to the capacity of the American economy to adapt to changing conditions.^{[citation needed]} When immigrants flooded labor markets on the East Coast, many workers moved inland, often to farmland waiting to be tilled. Similarly, economic opportunities in industrial, northern cities attracted black Americans from southern farms in the first half of the 20th century, in what was known as the Great Migration.

 

In the United States, the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs. Brought on by the process of mass production, corporations, such as General Electric, have been instrumental in shaping the United States. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations. Today in the era of globalization, American investors and corporations have influence all over the world. The American government is also included among the major investors in the American economy. Government investments have been directed towards public works of scale (such as from the Hoover Dam), military-industrial contracts, and the financial industry.