The unraveling of the sub-prime segment of the USA mortgage market, combined with falling home prices, the collapse of several investment banks and a severe and prolonged credit crunch, pushed the US economy into recession by the end of 2007. According to the National Bureau of Economic Research, the USA’s gross domestic product (GDP) continued to contract until June 2009, making it the country’s longest recession since World War II. Although no longer in recession, the US economy has not yet recovered its former vigour.
The USA experienced real growth of 2.8 % in 2010, according to the US Department of Commerce Bureau of Economic Analysis. This follows negative growth of –2.7 % in 2009. Manufacturing output, which the Federal Reserve reports as having increased each month for the past six months, is driving economic growth.
However, high unemployment, continued weakness in the US housing market and rising fuel prices are depressing consumer confidence, posing a risk to household spending, which makes up 70 % of the US economy. The recession has had a significant and persistent impact on the US job market. Average annual unemployment rate continued to rise between 2007 and 2010, leaping from 4.6 % in 2007 to 9.6 % in 2010, but is expected to fall to roughly 8.5 % by the end of 2011.
In January 2009, the US government passed a fiscal stimulus bill of 787 billion USD to be used over 10 years to create jobs and help with economic recovery.
According to the government, approximately two-thirds of the funds were injected into the economy by the end of 2010. More recent attempts to pass legislation to spur job growth have failed because of political opposition.
Recent growth in exports offset by rising imports
The USA is the world’s No.1 importer and fourth largest exporter. Although the country’s trade deficit fell to 380.7 billion USD in 2009, according to the US Census Bureau, it jumped by over 32 % between 2009 and 2010, as the economy recovered. Economists expect the trade deficit in 2011 to remain unchanged from 2010, as strong export sales match rising imports. However, climbing oil prices could cause the US trade deficit to rise this year.