Essay About Equity Markets And Participation Rate

Years of Recovery and Reinvestment
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Michelle 21 – 56Scott 57 – 92Dave 93- 126Collin 127 – 162Raj 163  – 194Chapter 1: 8 Years of Recovery and Reinvestment (21-56)Recovery in ReviewEmployment and WagesAdded jobs for 74 monthsAccelerated real wage growthOutput and Economic GrowthBy the fourth quarter of 2013, per-capita real GDP had fully recovered to its pre-recession peak, and by the third quarter of 2016, per-capita GDP exceeded its pre-crisis peak by 4 percent. Equity Markets, House Prices, Household Wealth, and Other MeasuresHome prices and S&P has increasedHealth care prices have risen at a slower rateThe Crisis and the ResponseOnce in a lifetime crisisHOusing, employment etc worse than depression in 1929Policy response:  2008- tax incentives to encourage business investmentRecovery Act: tax cuts and other temporary assistance that put cash in the hands of households who needed it immediately and who were likely to spend it, boosting aggregate demand. Monetary policy – Fed to retain near-zero interst rateStabilizing Financial Markets -package of short term measuresRescuing Automobile Market – GM and Chrysler bankruptcy/restructuring. Helped manufacturing industrySupporting the Housing Market – help to refinance homesImpact of Policy ResponseRecovery Act – saved/recovered 6 Mil jobs The Administration has achieved its most substantial and immediate success in this respect in three areas: restoring economic growth, expanding health insurance coverage, and enacting a fairer tax code.Chapter 1 continued (p. 57-64, Scott)Four Continued Structural Challenges: Productivity, Inequality, Participation, and SustainabilityAdministration addressed many barriers to growth, making sure that future growth is stronger and benefits are more widely shared. But, there are many ingrained barriers still to work on.Productivity GrowthHuge slowdown in labor productivity from 2005-2015Important contributor to living standardsHow to spurincreasing public investment in infrastructure; providing greater funding for research and development; reforming the business tax code to better incentivize innovation and investment; promoting high-skilled immigration; continuing to improve education and worker training; expanding trade, which can boost innovation through the spread of ideas across borders, greater specialization in innovative activities, access to larger markets by high- productivity firms, and expanded competitionIncome InequalityUSA – highest inequality, increasing the fastest among G7 economiesPolicies to help Quality education – expand and accessMinimum wage – increaseWorker Voice/Collective Bargaining – greater supportRents – reformTax reformLabor Force ParticipationStable since 2013: (Baby boomer aging = decrease) + (increase in labor force workers)Reduced participation rate for prime-age workers (25-54)Policies to combat: modernizing the unemployment insurance system and expanding wage insuranceexpanding tax credits for low-income workers and raising the minimum wageincreasing workplace flexibility by increasing access to paid leave and affordable child careEconomic SustainabilityGuard against future downturns: Modify the design of automatic stabilizersUnemployment Insurance – auto expand in times of needFurther curbs to entitlement costs in health care and limiting tax breaks for top %Climate Change – carbon emissions and clean energy economyChapter 2: THE YEAR IN REVIEW AND THE YEARS AHEAD (p. 65-92, went to 98, Scott)Year in ReviewReal GDP & Consumer Spending upInvestment and Government Purchases up/downMore jobs added, Inflation lowGlobal, Productivity and Labor Force Growth a challenge moving forwardYears Ahead (based on policies)Up: GDP, consumer spending, inflation (up then stabilize)Down: Unemployment rate Policy DevelopmentsFiscal Policy (restraint)Discretionary spending limits, infrastructure improvements, tax creditsFederal – purchases upState and Local – purchases weak, up and downMonetary PolicyFederal Open Market Committee (FOMC) tightens monetary policy because confident inflation would hit desired target range (2%), but federal funds rate downLabor MarketRecovery near to or to pre-recession levelsJobs & Earnings up, Unemployment downGrowth: “Professional and business services” and “education and health services” Decline: Mining and ManufacturingSlack, some stillLong term unemployment rate still falling to pre-recession levelsUnderemployment rate (Part time work, not by preference) still fallingOutputConsumer Spending – UpDisposable Income – nominal wages, lower oil prices – upbeat sentimentDebt to Income down, interest rates downP 98 – 126 (Dave)HOUSINGHousing market has recovered, but there are supply constraints, low affordability in some areas, and young people aren’t buyingNational home ownership is down from historical average = young people not getting married or buying housesHousing starts down = constrained supply = not meeting demand in long run could be problemHouses now more affordable than averageBUSINESS FIXED InvestmentDown overall because of slow growth in US and low oil prices,( IP investments up though) = threat to labor productivityInvestment only about 12% of GDP but has disproportionate effect because it affects labor productivity and future consumptionREAL Inventory Investment – has been down for awhile, which is unusal outside of recessionsNet Exports – strong dollar = bad for exportsExport grew a bit faster than imports, still a trade deficit PRODUCTIVITY-        Growth rate slowing over past decade because higher employment growth than gdp growth, recession lowered investment, less capital deepening Lower productivity common in other nations tooWant to remediaite it by infastricture spending, investing in education/job training, TPP, encourage R&DWAGES/PRICE Inflationnominal wage inflation has increased with the strong recovery in the labor market. However, the pace remains below the pre-crisis pace. Inflation was below 2% target of Fed mainly because of lower energy pricesPut the following 2 bullet points together and american workers have had some real wage gains :)Household income has gone up; largest gains at bottom of income distributionFINANCIAL MARKETSRobust in 2016, investor sentiment cautisouly optimisitic, volatile equity markets, but overall up.Equity markets were down at start of year then recoveredERP: Consumption & Investment (Pages 127-162)Collin Interest Rates & Credit Spreads