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Friday, April 23, 2010

RSG U.S. Economic Brief for April 2010

Dr. Douglas O. Walker
Robertson School of Government

This month's brief provides a general overview of the state of the U.S. economy and the economy of the region. It points out that the general level of economic activity in the U.S. is no longer falling but seems to have stabilized. The economy does not appear to be recovering as quickly as in the past, however, and Personal income, while starting to rise, is struggling to maintain its momentum. Some points made in the Brief are:

 • Personal income and one of its main components, private sector payrolls, have both risen and fallen in recent months, reflecting the uncertain state of the U.S. economy;

• Similarly, personal consumption expenditures, while rising, are on an unsteady trend;

• The real GDP -- the output of goods and services produced by labor and property located in the United States -- has been rising for several quarters and gross private domestic investment and corporate profits increased significantly during the last half of 2009, further pointing to a stabilization of production in the U.S. economy;

• Some sectors of the economy continue to struggle, notably housing with its negative implications for banking and the financial sector. The problems in the housing market are expected to continue for several more years;

• Reflecting the national situation, the economic decline of Virginia and its wider region appears to be slowing down with signs of improvement in some sectors; and

• On the policy front, the Administration is pushing Congress to enact stricter regulations on the financial sector, a Fed regional bank President expects interest rates to remain near zero, and the possibility of a value-added tax is being discussed.

The U.S. economy continues to strengthen but there are many uncertainties surrounding not only the domestic economic situation but the state and prospects for the world economy. The fiscal deficit remains unsustainable and the financial system remains under intense pressure. Developments in the months ahead will be critical in determining whether the limited recovery reported on here gathers momentum or the economy experiences a prolonged period of stagnation.

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