Cui Yiquan: Has the US Economy Recovered?

The U.S. rides a wave of good tidings even as Europe finds itself in another economic bind with Italy’s newly downgraded credit rating.

The nonagricultural February jobs report indicates the unemployment rate fell to 7.7 percent, its lowest in four years, even lower than January’s figure of 7.9 percent.

Details in the report reveal that U.S. employment figures have improved beyond expectation, including an above-average February construction report showing a clear increase in workers’ average hours.

Surprisingly, the improved employment rate coincided with the arrival of the fiscal cliff, upending the universally held expectation that the “cliff” would worsen the economy. Some experts point out that the fiscal headwind is a contributing factor in the unemployment rate going down.

Tax increases coupled with social benefit decreases have led to individual family budgets coming up short. For Americans, who lack a savings ethic and are used to high consumption, living frugally is not as appealing as earning enough to maintain consumption demands. Therefore, the number of people opting for employment has increased somewhat.

Additionally, according to an analysis by The Washington Post, the gradual implementation of austerity has reduced uncertainty regarding government expenditures and public tax revenues. Once cautious about payroll hours, businesses now have a better sense of the government’s regulatory economic measures and aptly are gearing up to recruit employees.

Of course, not everyone holds the same viewpoint on the employment report. The Wall Street Journal points out that the unemployment rate does not factor in the continuous reduction in the U.S. labor force in recent years. Because of a diminished labor base, the decrease in the unemployment rate does not guarantee an increase in the number of employed persons overall.

Regardless of whether the 7.7 percent unemployment rate augments reality or not, we can be sure that the report has stimulated and restored the government and people’s confidence in the U.S. economy.

However, now may not be the time for Americans to rejoice. A new round of doubts, and even terror, is creeping up. Approximately 750,000 jobs cuts are part of automatic spending reductions in effect March 1 nationwide according to U.S. Congressional Budget Office predictions. U.S. media reports warn that the unemployment rate hitting a new low is only a brief respite before an inevitable slowdown; doomsday fears are once again wearing down the economy.

Some analysts believe that such pessimistic arguments are symptomatic of the U.S.’s tendency to herald its own decline. Current economic data show that the U.S. economy is actually healthier than anticipated, and its ability to resist conflict is stronger. The effects of recent developments in the U.S. economy are still current and far from the terrible mess the media makes them out to be. America could emerge out of the crisis and once again lead in the global economy.

I agree with the British newspaper The Guardian’s analysis: Although the automatic spending reductions’ shockwave is unavoidable, the U.S. market has the ability to gradually dilute and absorb its negative effects. It is not very likely that the U.S. economy will experience major rollercoaster ups and downs. Ultimately, it will use its strength to steadily pace itself toward renewal.