Home Insights Indicators of Economic Change – Are Business Formation, Investment, and Unemployment Levels Up?

Indicators of Economic Change – Are Business Formation, Investment, and Unemployment Levels Up?

by Jackson B

Despite all the challenges in today’s economy, global GDP growth is expected to grow 3.3% in 2020, and 4.4% in 2020. These projections of steady economic growth through the year mean that the global economy is still in good condition to weather any potential adverse external shock to its status. The sources of economic growth are diverse, but the main drivers remain intact: strong investment and consumption in key economic sectors, strong international trade, liberalization policies, increased access to advanced technology, and a flexible workforce ready to take on more responsibilities in their jobs.

Despite these heady times for all economies, there are some bright spots amid this challenging economic picture. One of these bright spots is the emergence of emerging Asian economies like India, Singapore, and China as major players in the global economy. Rapid political and economic reforms in these Asian countries have eased constraints on private sector investment, increased access to advanced finance, improved access to quality goods and services, and the emergence of lower-income households with greater purchasing power. While some of these benefits may only be temporary, a prolonged period of sustained high growth is still possible – as long as the right conditions are provided for this emergence.

The second area of potential long-term recovery is the United States economy. The current recession has dealt a serious blow to the U.S. economy, but the recovery is still possible, according to economists. To be sure, the Great Recession brought about a widespread Panic in many parts of the world’s economy, and the process will take time and effort. But, a more positive aspect of the U.S. economic crisis is the fact that it sparked off a very rapid fire of government policy initiatives to stimulate the economy. Such measures have been helping to lift the economy out of its recent slump.

And what of the future? Is the economy heading towards Great Depression or recovery? Well, it is important to note that Great Depression lasted from the 1930s until the Great Depression of the 1930s, which was the longest economic depression in the history of the United States. As of now, the U.S. economy is far from experiencing a Great Depression, but recessions do occur, just as they do in the global economy.

There is reason to believe that the Great Recession might be short-lived, as recessions do go, but it is far from clear whether the U.S. economy will experience a recession or not, especially as recessions tend to last longer than we are used to experiencing them. A major component of economic recovery being discussed at this point is the availability of consumer and business credit. If we can continue to increase the availability of consumer credit, it is likely that the economy will experience a significant recovery from the crisis, even though the extent of this restoration will vary depending on the individual circumstance of each household in the economy.

There are two key drivers of the economy that will impact business formation, investment, and employment levels: consumer demand and business formation. In looking at the indicators for these three drivers of growth, there are four distinct phases of change that we can monitor to better understand the state of the economy. The first phase of change refers to the general feeling of optimism that consumers are expressing in the market, business formation, investment, and employment rates. This first phase of change is accompanied by the gradual recovery of the economy from the Great Recession.

When the economy experiences a period of time where it does not feel its footing in regards to consumer demand, business formation, and investment, this is usually an indication of the economy experiencing a recession. An increase in investment, job creation, and an improvement in the overall level of output are all expected during this second phase of change. The second phase of change occurs after the second recession. This is typically an “upside down” economy, in which companies begin to invest in areas in which they have a competitive advantage. An increase in the unemployment rate, lower consumer demand, and an increase in structural damage to the economy due to the recession have all been indicators of this stage of change. During the recession, the economy did not have as much room to either create new businesses or to expand the number of jobs it has.

The last phase of change, which is an “upward shift” in the overall economy, happens when unemployment is reduced to around 4%, investment begins to pick up, and the number of unemployed decreases. The Small Business Administration reports that there are still over one million of the United States’ unemployed population today who have not found work. Of course, as employment improves, these numbers of unemployed people begin to go back to work. These indicators of economic change are very important factors in determining the health of our economy, so it is important to keep an eye on them.