Managing the Three Pillars of the Economy for Sustainable Growth

Abstract

The highest unemployment rate in the United States (US), 24.9%, was reported during the great depression from August 1929 to June 1938, and it remained above 10% until 1941. The US unemployment rate reached another high of 9.8% in 2009. Some market watchers predict it will occur again in the next two years. The economy's slow growth causes higher rates of unemployment with declining gross domestic product (GDP). Fewer jobs mean less income for US citizens, and less money available to spend leads to less consumption. As a result, GDP begins to decline. As GDP declines, businesses have fewer funds leading to a reduction of payroll and reducing personnel to reduce cost generated by salaries and wages. This leads to the belief that any of these two items are correlated. That is to say, that they vary together as the economy grows, providing a linear model for the quantities. The distribution of the differences between unemployment (UNMP), inflation (INF), and GDP, considering the quantities, UNMP-INF is right skewed and that of INF-GDP exhibits symmetry, while they both are unimodal. Using the ARIMA (2, 1, 0) Model we forecast GDP growth for the year 2018 and a few more years after that. As of now, it appears that the GDP estimate obtained for the year 2018 fits just about right.Businesses find themselves in the apathy of hiring personnel or waiting until the company is on a stable footing concerning the economic situation. The government has observed the unemployment rates in the US since the stock market crash in 1929 as a way to prevent further damage to the US economy. It is often said, "When the unemployment rate reaches 6.0%, the government steps in" (Amadeo, 2018). If the unemployment rate is too high, the government opts to use a monetary fund to counteract the possible damages to the economy. If unemployment persists, the US Congress also uses fiscal policy, and it can even create employments and give out benefits to those in need. Thus, it is important to have a detailed understanding of these quantities.