I am very pleased with the blog results last week. Most of you were able to post your comments without incident and many of you approached the issue from different perspectives. Keep up the good work!
However, there were a few students who plagiarized, perhaps without knowing. Remember to give credit when you use someone else’s work, and use quotation marks when you state someone else’s work word by word or with minimal changes. In addition, many of you expressed your opinions but forgot to back them up with facts. In the future, comments lacking supporting facts will not receive credit.
With regards to the increase in GDP of 5.7% for the 4th quarter of 2009, once you remove the change in private inventories, the real final sales of domestic product is only 2.2%. Restocking of inventories contributed 3.5% to GDP growth in the 4th quarter of 09. As expected, business inventories tend to increase as the economy comes out of a recession. Nonetheless, a 2.2% increase in GDP is in line with sustainable economic growth in the United States. When you consider the decline in government spending during the 4th quarter of 09, the rise in GDP must be credited to the consumer. Of course there were some government incentives that contributed to the increase and we will have to see if the consumer can continue to carry GDP growth over the next few quarters once government incentives begin to wane and inventories return to historical averages.
On a different note, productivity, or change in output per hour, was up 7% in the 4th quarter following increases of 8.1% and 6.9% in quarters 3rd and 2nd, respectively. Good for business, bad for unemployment since employers were able to get more out of every worker; and therefore, delayed hiring new workers. Consequently, the 5.7% increase in GDP did not result in a significant decline in the unemployment rate. However, over time, each worker reaches his or her maximum potential and further increases in GDP will result in new employment.
Furthermore, the unemployment rate declined during the month of January to 9.7% from 10% in December, and the broader measure that includes discourage workers fell to 16.5% from 17.3% in December. Historically high numbers, but it seems that unemployment has remained stable since last summer. And again, if GDP continues to grow at a modest pace, once productivity is maxed out, unemployment should go down.
As a business student, think about the opportunities this economic environment offers new businesses. With unemployment close to 10%, what kind of product or service can a new business offer in this marketplace? Be creative, think outside the box.
Hint: If you got a chance to watch the Super Bowl game, did you notice the commercials?
