State of the U.S. economy

As analysts predicted, the robust economy we've been experiencing in the United States is slowing down. Weak economic conditions in Asia as well as the instability of world financial and foreign-exchange markets are precipitating this slowdown. On Aug. 31, the stock market plummeted 512.61 points, or 6.36 percent, eliminating the remainder of the year's gains. However, despite the financial market, some of the other sectors that contribute to the overall stability of the U.S. economy remain at positive levels. * Unemployment. In July, the number of unemployed individuals was 6.2 million. The unemployment rate remained at 4.5 percent. Since July 1997, the unemployment rate has remained under 5 percent, the lowest it has been during the past decade. * Labor and earnings. The average workweek in the U.S. labor market has experienced only minor slowdowns as a result of Asian activity. The average workweek remained at 34.5 hours, despite the slight decline in the manufacturing workweek, which dropped from 41.8 hours in June to 41.7 hours in July because of the General Motors strike.

Annual personal income continues its steady ascent. According to the Commerce Department's Bureau of Economic Analysis, personal income increased $34.2 billion (0.5 percent) ,and personal disposable income increased $27.5 billion (0.5 percent) in July. While wages and salaries increased 0.6 percent in July, factory payrolls experienced a decrease. * Consumer prices and spending. For the first half of 1998, consumer prices-excluding food and energy-rose at an annual rate of 2.5 percent, compared to a 2.2-percent increase for all of 1997 (see Graph 1, below). In July, consumer spending dropped 0.2 percent, which was the first decrease in 2 years, according to the Commerce Department. Part of this decline can be attributed to the drop in automobile sales, again a result of the General Motors strike. * Housing starts. Housing starts reached a seasonally adjusted annual rate of 1.72 million in July, the highest it has been since March 1987, reports the Commerce Department. July saw an increase of 5.7 percent over June's 1.63 million, which was the highest it had been in more than a decade. And for the first 7 months of this year, home sales and home building were up 9.8 percent from the same period in 1997 (see Graph 2, below).

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For the past 3 months, 30-year fixed-rate mortgages have been hovering just under 7 percent. The median price of a new house was $147,900 in July.

Economists say that housing is one sector of the market that hasn't suffered due to the Asian financial crisis, and, in fact, it has helped to slightly offset the damage to the economy.As the graph shows, in the second quarter of 1998, housing starts accounted for more than one-third of the 1.6-percent increase in the Gross Domestic Product (GDP).

Source: U.S. Department of Labor's Bureau of Labor Statistics; U.S. Commerce Department.

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