PROJECT REPORT On

ANALYSIS OF ECONOMIC ENVIRONMENT OF U.S

SUBMITTED ToMr. MOHAMMAD IRFAN

Submitted bySHUBHAM UPADHYAY (PGDM 157) ZISHAN AHAMAD (PGDM 186) VIKAS SINGH (FS 60) ARUN KR MAURYA (FS 62) RAHUL DWIVEDI (RM 23) QAEM ZAIDI (RM 26)
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Abstract
This project examines the evolving structure of the American economy, specifically, the trends in economic environment of U.S.A from 19XX to 2011. These trends are closely connected with complementary trends in the size and structure of the global economy. Employing historical time series data from the Bureau of Labor Statistics and the Bureau of Economic Analysis & doing business in U.S.A.

Executive Summary
1. The economy of the United States is the world's largest economy. Its nominal
GDP is estimated to be over $15 trillion in 2011, approximately a quarter of nominal global GDP. The European Union has a larger collective economy, but is not a single nation. Its GDP at purchasing is the largest in the world, approximately a fifth of global GDP at purchasing power parity.

2. The U.S. economy maintains a very high level of output. In 2011, it was
estimated to have a per capita GDP (PPP) of $48,147, the 7th highest in the world, thus making U.S. one of the world's wealthiest nations.

3. The U.S. is the largest trading nation in the world. Its three largest trading
partners as of 2010 are Canada, China and Mexico.

4. A central feature of the U.S. economy is the economic freedom afforded to the
private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces. This is enhanced by relatively low levels of regulation and government involvement, as well as a court system that generally protects property rights and enforces contracts.

5. Value of currency is very high, about 60% of the global currency reserves have
been invested in the United States dollar, while 24% have been invested in the euro.

6. The country is one of the worlds largest and most influential financial markets.
Foreign investments made in the United States total almost $2.4 trillion, which is more than twice that of any other country. American investments in foreign countries total over $3.3 trillion, which is almost twice that of any other country.

7. Total public and private debt was $50.2 trillion at the end of the first quarter of
2010, or 3.5 times GDP. The proportion of public debt was about 0.9 times the GDP. Domestic financial assets total are $131 trillion and domestic financial liabilities total $106 trillion.

8. The United States is home to 29.6 million small businesses, 30% of the world's
millionaires, 40% of the world's billionaires, as well as 139 of the world's 500 largest companies. From its emergence as an independent nation, the United States has encouraged science and innovation.

Introduction
In the post crisis environment, issues of sustainability in the trajectory of the U.S. economy have come to the fore. Among the problems pointed to be a large current account deficit, the paucity of household savings, overleveraging in the financial and household sectors, and stagnation of middleclass incomes. However, what appears missing is a detailed look at the structural shifts in the economy over longer periods, and the way in which the emerging economies growth is affecting the pattern of industry employment and value added in the United States economic structure over the past twenty years and exploring the implications of such shifts. The American economy does not exist in vacuum; some of its most striking evolving characteristics are tied to long-term trends in the developing world and especially the large emerging economies. The project report includes with Employment, Research development, and entrepreneurship, Income and wealth, financial position, Composition Currency and central bank, employment, interest rates, business spending, inflation, Trade executive summary and the evolving structure of the U.S economy.

Structural Evolution of the U.S. Economy

The structure of the American economy is evolving. Technology is one of the driving forces, both domestically and in integrating the U.S. economy with the global economy. The domestic economy does not operate in a vacuum. In relatively open global economy, structural change in emerging economies causes structural change in advanced countries. When a certain kind of activity declines in u.s economy, normally it does not just disappear from the global economy, but instead moves to another location. These powerful market forces operate directly on the tradable sector, and indirectly on the no tradable portion through wage and price effects and shifting opportunities in labor markets to divide the economy and its component industries into the tradable and non tradable parts.

United States GDP Growth Rate

The Gross Domestic Product (GDP) in the United States expanded 3 percent in the fourth quarter of 2011 over the previous quarter. Historically, from 1947 until 2011 the United States' average quarterly GDP Growth was 3.28 percent reaching an historical high of 17.20 percent in March of 1950 and a record low of -10.40 percent in March of 1958. The United States is a market-oriented economy where private individuals and business firms make most of the decisions. The federal and state governments buy needed goods and services predominantly in the private marketplace.

INCOME AND WEALTH

According to the United States Census Bureau, the pretax median household income in 2007 was $50,233. The median ranged from $68,080 in Maryland to $36,338 in Mississippi. In 2007, the median real annual household income rose 1.3% to $50,233, according to the Census Bureau. The real median earnings of men who worked full time, year-round climbed between 2006 and 2007, from $43,460 to $45,113. For women, the corresponding increase was from $33,437 to $35,102. The median income per household member (including all working and non-working members above the age of 14) was $26,036 in 2006. The average home in the United States has more than 700 square feet per person, which is 50%100% more than the average in other high-income countries. Even in the lowest income percentiles people enjoy more space - average 400 square feet per person than middle classes in Europe do. Likewise, ownership rates of gadgets and amenities are exceptionally high compared to other countries. The recently released US Income Mobility Study showed economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2004 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups. Between June 2007 and November 2008 the global recession led to falling asset prices around the world. Assets owned by Americans lost about a quarter of their value. Since peaking in the second quarter of 2007, household wealth is down $14 trillion. The Fed said that at the end of 2008, the debt owed by nonfinancial sectors was $33.5 trillion, including household debt valued at $13.8 trillion. About 30% of the entire world's millionaire population resides in the United States (in 2009). The Economist Intelligence Unit estimated in 2008 that there were 16,600,000 millionaires in the USA. Furthermore, 34% of the world's billionaires are American (in 2011).

FINANCIAL POSITION
The overall financial position of the United States as of 2009 includes $50.7 trillion of debt owed by US households, businesses, and governments, representing more than 3.5 times the annual gross domestic product of the United States. As of the first quarter of 2010, domestic financial assets A totaled $131 trillion and domestic financial liabilities $106 trillion. Tangible assets in 2008 (such as real estate and equipment) for selected sectors B totaled an additional $56.3 trillion.

US Industry Sectors
Agriculture and the industrial sector made up 1.2 percent and 19.6 percent of USs GDP in 2010 respectively. This percentage can be relatively deceiving. The US is not only the third largest agricultural producer in the world behind China and India, but is also the leading industrial power in the world. Agriculture is a vital part of US economy and society. According to the last census of agriculture in 2007, there were 2.2 million farms in the US - covering an area of 922 million acres. Farmers are also one of the major political lobbyists in the US as they are primarily responsible for the countrys food demands. Among US agricultural products include wheat, corn, other grains, fruits, vegetables, cotton, beef, pork, poultry, dairy products, fish, and forest products.

US Population and Labor Force

The US population for 2010 was 310.282 million. Although the US population is significantly lower compared to India and China, the US has the highest labor force participation rate in the world with 139.396 million employed. The majority (35.5 percent) of the labor forces occupations are managerial, professional or technical in nature. A further 24.8 percent hold sales or office jobs,
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22.6 percent are in manufacturing, extraction, transportation and crafts, 0.6 percent are in arming, forestry or fishing and 16.5 percent have jobs in other services. Unfortunately, the labor force has yet to recover fully from the 2008 financial crisis. Unemployment rates in the US nearly doubled in 2009 from 5.817 percent to 9.275 percent while 2010 saw a further increase to 9.73 percent.

EMPLOYMENT
The job market is strengthening but the turnaround in 2012 wont be dramatic, with barely enough job creation to lower the unemployment rate - 8.3% in February to around 8% by year-end and not enough oomph to spur much economic growth. The U.S. economy created an average of 245,000 jobs a month from December through February, the best three months since 2006. But that pace will slow as higher gasoline prices crimp consumer spending on other goods and services and recent gains in manufacturing employment flatten out with slower export growth, due to the cooling global economy. Barring a major energy shock that stalls economic growth, we expect job creation to average about 185,000 a month or 2.2 million for the year. Private sector employers will actually add about 2.4 million jobs, but that will be partially offset by continued paring by cash-starved local governments. Look for them to eliminate roughly 200,000 jobs this year. Paradoxically, the recent pickup in hiring may nudge the unemployment rate up a bit in coming months, as some folks who gave up looking for work decide to rejoin the job hunt. That effect will wear off by the second half of the year, however, and the jobless rate will decline. Despite the recent acceleration in hiring, it is still a tough market for job seekers. More than two years after the end of the Great Recession, the number of workers unemployed for more than 27 weeks is 5.4 million, near its all-time high
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and unchanged in February. Likewise, the number of workers forced to take a parttime job is 8.1 million, little changed from January. Wages are likely to continue to creep higher, with the pace accelerating with stronger economic growth in the second half of the year. Wage hikes remain well below the rate of inflation for now, rising just 1.9% in the last 12 months, compared to a nearly 3% gain in the Consumer Price Index. Faster wage growth later this year could trigger new concerns about inflation.

United States Inflation Rate

The inflation rate in United States was last reported at 2.9 percent in February of 2012. The Labor Department said the consumer price index rose 0.4 percent in February, the largest increase in 10 months, largely because of higher gasoline prices. From 1914 until 2010, the average inflation rate in United States was 3.38 percent reaching an historical high of 23.70 percent in June of 1920 and a record low of -15.80 percent in June of 1921. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.

Monetary & Fiscal Policy

The role of government in the American economy extends far beyond its activities as a regulator of specific industries. The government also manages the overall pace of economic activity, seeking to maintain high levels of employment and stable prices. It has two main tools for achieving these objectives: fiscal policy, through which it determines the appropriate level of taxes and spending; and monetary policy, through which it manages the supply of money. The Federal Reserve, the independent U.S. central bank, manages the money supply and use of credit (monetary policy), while the president and Congress adjust federal spending and taxes (fiscal policy). Since the inflation of the 1970s, Federal Reserve monetary policy has emphasized preventing rapid escalation of general price levels. When the general price level is raising too fast, the Federal Reserve acts to slow economic expansion by reducing the money supply, thus raising short-term interest rates. When the economy is slowing down too fast, or contracting, the Federal Reserve increases the money supply, thus lowering short-term interest rates. The most common way it effects these changes in interest rates, called open-market operations, is by buying and selling government securities among a small group of major banks and bond dealers. A particularly tricky situation for monetary policy makers, called stagflation, occurs when the economy is slowing down and inflation is rising too fast. In 2006 real wages rose 1.7 Percent. This means an extra $1,030 for the typical family of four with two wage earners. Real median household income in the United States climbed between 2005 and 2006, reaching $48,200. The wage growth translates into an extra $585 for the average full-time worker and an extra $1,030 in 2006 for a typical family of four with two workers. The President's Tax Relief enabled more than 5 Million taxpayers, including 4 Million taxpayers with children, to have their income tax liability completely eliminated in 2006. As a result of the President's tax relief, a family with two children now begins to pay income taxes when their income reaches $41,867. Without tax relief, the same family would have begun to pay income taxes when their income reached $33,070. The President's Tax Relief is helping Americans keep more of what they earn.

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United States Interest Rate

The benchmark interest rate in the United States was last reported at 0.25 percent. In the United States, authority for interest rate decisions is divided between the Board of Governors of the Federal Reserve (Board) and the Federal Open Market Committee (FOMC). The Board decides on changes in discount rates after recommendations submitted by one or more of the regional Federal Reserve Banks. The FOMC decides on open market operations, including the desired levels of central bank money or the desired federal funds market rate. From 1971 until 2010 the United States' average interest rate was 6.45 percent reaching an historical high of 20.00 percent in March of 1980 and a record low of 0.25 percent in December of 2008. This page includes: United States Interest Rate chart, historical data and news.

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United States Government Debt to GDP

The Government Debt in the United States was last reported at 93.2 percent of the countrys GDP. From 1940 until 2010, the United States' average Government Debt to GDP was 59.40 percent reaching an historical high of 121.70 percent in September of 1946 and a record low of 32.50 percent in September of 1981. Generally, Government debt as a percent of GDP is used by investors to measure the United States' ability to make future payments on its debt, thus affecting the United States' borrowing costs and government bond yields. This page includes a chart with historical data for the United States' General Government Gross Debt as a percent of GDP.

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TRADE
The U.S. trade deficit to grow in coming months as rising oil prices push imports higher. In January, the deficit climbed 4.3% over the previous month, a sign of increased consumer confidence and more spending here in the U.S. It was the highest monthly deficit since October 2008. Add the impact of oil prices above a $100 a barrel, as we saw last month and the value of imports will skyrocket. Expect an annual trade deficit of $620 billion in 2012, up 11% over last year. Exports will grow at a slower pace this year than last, with a recession in Europe and slower growth in emerging markets. Still, exports increased almost 8% in January over the same month a year ago. If that pace continues, exports will total $2.25 trillion this year. Look for import gains to more than offset export growth as U.S. consumers keep snatching up foreign cars, electronics and other consumer goods. Imports climbed 2.1% in January, compared to a 1.4% gain in exports. For the year, expect imports to rise about 8%, possibly more if oil prices stay high for an extended period of time. The trade deficit with China will hit another record this year as demand for consumer goods rises here and Chinas breakneck growth slows. In 2011, U.S. exports to the Asian giant hit nearly $104 billion, while imports climbed to almost $400 billion. The deficit with the European Union is also likely to rise this year. Imports from the 27 European countries fell 8.7% in January, offsetting a drop in exports, but the trade gap is expected to widen again as austerity measures there zap consumer demand for U.S. exports.

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Conclusion

The U.S. economy continues to be a leading competitor and innovator in the global economy as measured by its overall performance, market position in Science and Technology industries, and trends in patenting of new technologies at home and abroad. The U.S. economy has grown relatively rapidly and become more productive while sustaining a high and rising per capita income. The U.S. gap with Asia on many of these measures is narrowing, however, because of rapid progress by China and several other countries. Although the EUs economic position is relatively strong, its market position in Science and Technology industries has either flattened out or slipped. The strong competitive position of the U.S. economy is tied to continued U.S. global leadership in many industries that have extensive ties to Science&Technoloogy. With the service sector increasingly dominating global economic activity, the United States continues to hold the dominant market position in service industries that rely on Science & Technology. The U.S. trading position in technology-oriented services remains strong, as evidenced by the continued U.S. surplus in trade of computer software and manufacturing knowhow. The U.S. position in high-technology manufacturing industries, however, is not quite as strong as in services. The United States continues to be a leading innovator and producer in many high-technology manufacturing industries, but the historically strong U.S. trade position has decreased. Although in surplus for the prior two decades, the U.S. trade balance moved to a deficit during the late 1990s because of faster growth of imports, primarily in computer and communications equipment. The U.S. trade balance in advanced-technology goods has similarly moved from surplus to deficit during this period. Led by China, South Korea, and Taiwan, Asia is challenging the U.S. market position in Science & Technology industries and reducing the gap on technological innovation. China has rapidly risen to become a leading producer and exporter of high-technology manufacturing goods, as measured by world market share. This rapid ascent shows signs of continuing. South Korea, Taiwan, and other Asian economies have also become leading producers and exporters in S&T-intensive industries.

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Various patenting indicators suggest that the United States will remain a leader in technological development within its domestic and foreign markets. The leading source of economically valuable patents known as triadic patents, the United States also leads in U.S. patent applications and is the leading foreign source of European patent applications. Asia shows a strengthening of technological development, however; its share of U.S. and European patents has risen markedly, led by Japan, South Korea, and Taiwan. In sum, the United States continues to be a world-class competitive and technologically innovative country with a leading position in most high-technology industries. Several Asian economies, however, including China, South Korea, Taiwan, and India, have become global players in some high-technology industries, and their technological capabilities are strengthening. The EU, on the other hand, has lost market share in high-technology industry.

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