Victor Marcos Hyslop April 6, 2020

The gross domestic product, better known as GDP is a widely used way of measuring the
wealth of a state. The GDP for a country is the sum of all its economic output, and it is
measured on a yearly basis. The annual GDP growth rate varies depending on the global
economic situation and on the country itself where the GDP is being measured. During times of
global recession, every state’s GDP diminishes, showing a negative GDP growth rate. In
normally good conditions, developed countries’ GDP growth rate ranges in between of 2% to
5%. The United States as an example of a developed country, has experienced an average of
2.4% growth rate on its GDP (annual basis) on the last 10 years. The latest data available, for
the 2019 year, shows a 2.4% growth rate for the U.S.’ GDP. For developing countries, GDP
growth rate on “sane” economical conditions both worldwide and intrinsically within the
country is above 3%.
The Covid-19 worldwide outbreak has damaged the economical conditions for the
United States of America and the rest of the word. The supply chain has been broken or at least
damaged for almost every consumption product as many businesses big and small have had to
shut down their operations. The fact that businesses are shutting down harms the economy
both on macro and on microeconomic indicators. Many businesses are unable to maintain all
their employees during this type of economic climates, the result is an increased
unemployment rate. Important to note that the unemployment rate accounts for citizens
without a job but currently looking to find one. The current number of unemployed persons in
the U.S. is of 7,140,000. The amount mentioned contrasts with the number of unemployed
individuals of February, 2020 just one month ago which was of 5,787,000. The shift in
unemployment numbers accounts for almost 1% point as from February, 2020 to March, 2020
the unemployment rate for the U.S. increased from 3.5% to 4.4%.
The total population of the United States of America is of 329 million individuals and
growing by a yearly diminishing current 0.7% rate. From that number, another indicator is
derived. The Labor Force which represents every American citizen capable of working without
differentiating non-employed citizens actively looking for a job than the ones that do not want a
job (underaged and retirees are left out of this number). The number of employed Americans
on the March, 2020 federal data, reports a level of 60%. The month of March suffered a severe
shortfall on this indicator as since 2016, the employment rate had been increasing constantly
from 59.25% to 61.25% on February, 2020. The shortfall experienced because of the
coronavirus outbreak puts the U.S. employment rate back to 2017 levels. The actual number of
employed persons is of 155,772,000, the 1% reduction for that indicator suffered just in the
month of March this year translates into an almost 3 million job cuts when comparing that
statistic to the February, 2020 number of 158,759,000.
Inflation is harsh with the population of a country. Inflation is the increase in prices for
consumption goods and its most widely accepted measure is the consumer price index better
known as the CPI. The CPI measures the prices of specific basic consumption products and
compares it on a yearly basis. Then, the increase/decrease in the CPI’s products prices is the
inflation/deflation rate for the country. The actual inflation rate for the United States is 2.3%
and it is projected to lower as of the current economical crisis that the country and the entire
Victor Marcos Hyslop April 6, 2020

world is getting into. Since 2010, the inflation rate for the U.S. has ranged from 3.9% to a
negative -0.4% which is a pretty stable and quite optimal range as the average has been of
2.4%. For an average citizen, the higher the inflation rate the less its money’s value is. As an
example, if in 2019 a Texan was able to buy a beer on $1 and the inflation rate for 2020 is of
50%, then the price of the same beer would be $1.5 on 2020. The problem for the population is
that salaries are not often adjusted for inflation, so if an engineer gets paid $100,000usd yearly,
it could buy 100,000 beers in 2019 and just 66,667 beers in 2020. In developing countries, high
levels of inflation are quite common. Examples from insane inflation levels can be seen in Latin
America and Eastern Europe.
As the inflation rate is positively correlated with the economic growth of a country, it is
dependent on both fiscal and monetary policy; just as the economic growth. The main and most
common resource implemented by the central banks in order to control inflation rates and fuel
the economic growth is to manage the interest rates. Interest rates for the U.S. have been
historically low for the last 10 years as the result of the 2008 crisis. The debacle caused by the
banking system failing in 2008 made the Federal Reserve (United States Central Bank) to low its
interest rate onto a level of 0.25% in an extreme expansionary policy which resulted in the
outcome that the country was expecting. Since 2016, the interest rate started increasing
gradually onto above 2% and in order to mitigate the coronavirus outbreak crisis, since January
2020 when Interest rates where at 2.25% to March, 2020, the interest rate is back to 0.25%.
This has been an expansionary move looking forward to incentivize consumption and cash flow
much more attractive for U.S. investors and keep the economy moving forward.
In order to control the country’s macroeconomic indicators within an optimal range and
increase social welfare, since 2016, the corporate tax rate has decreased from 35% to 21%. The
tax break of 35% had been stable since 1994. The reduction on the tax rate contributed to an
increased budget deficit on fiscal policy. In order to spend more than its revenues, the U.S.
government incurs in debt which right now is at 106.9% out of its GDP. The level of debt to GDP
increased substantially since 2009 where the average had been 60% on the past 10 years from
there.
Due to the actual economic worldwide situation on the covid-19 outbreak, times are
changing as can be seen on the different macroeconomic indicators. Such an indicator that
times are uncertain and expected to go bad is the price of gold and silver. The price of gold per
ounce as a commodity is of $1,660.20 with its price having moved 28% since the last year. The
price of Silver has been experiencing out-of-normal volatility for the last 2 months. These two
commodity prices are market sentiment indicators that indicate hard times in the future to
come. It is important to constantly analyze these macroeconomic indicators as they directly
affect the life of every citizen. The ability of reading the indicators and knowing their meaning
let you prepare yourself and prepare your business for the times to come by taking the proper
decisions. For myself, I regret that this crisis is occurring exactly on my commencement
semester. On the other side, I feel confident on the decisions being take by the government
specifically the economic measures. Optimal economic decisions will hopefully reverse this
crisis in the near years to come.