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What’s happening with the U.S. and El Paso Economy?
by Alejandro Fernandez
March 17, 2010
The United States along with Europe, Britain, Australia and practically the whole world used Keynes’s bible of economics for the prevention of what could have been the worst recession since the 1930’s. A combination of both monetary and fiscal policy has been used in order to make money cheap by lowering the interest rates, cutting taxes, increasing public spending and not to mention bailouts. The United States lower their interest rates a record low between 0 and 0.25 percent where the recession initially began and as the ripple spread it made other central banks to do the same, Europe decreased theirs to a low of 1.00% and Britain to 0.50%. The recession also led to a flight of fear to the dollar making it appreciate from a record low of 0.63 euros to the dollar, $1.00 dollar = 0.63 euros, to 0.79 euros to the dollar, $1.00 dollar = 0.79 euros, which might not seem like a lot but it is because you are getting more euros for the same dollar. A strong Dollar is important as it will have more purchasing power to import from other countries. The problem is that the United States has more consumers than it has producers, in order to have a strong dollar the country must produce more or have some other way of financing its deficit. One way that the United States has been financing it deficit for so long is through the selling of bonds. China has been buying U.S. debt for some time now and they bought more after the prevent recession. So after about one year of worries and doubts where are we now as a nation and as a southwest community.
National Level
The job market has been slowly recovering after losing about 8.4 million jobs since the recession according to Bloomberg. This suggests that house hold worth rose at a slow pace. The unemployment rate was at a high of 10.0% for the beginning of this year, and has slowly decreased to a rate of 9.7% for the month of January and remained constant for the month of February also. This is a good sign that jobs are being kept and that new jobs are being created. In January the difference between jobs created and jobs dropped was only of a drop of 20,000 and in the month of February there was a drop of 36,000, considering that these drops were in the hundreds during the recession. Another sign that the U.S. is recovering is that of rising Consumer Price Index and Producer Price Index that are indicators for inflation made the Federal Reserve to raise interest rates to 0.25% on January 27, 2010 in anticipation of forecasted inflation, and to give a little incentive to lending money. This, along with problems in Europe led to Dollar appreciation. Lastly GDP growth in the last three quarters, December, January, February, has been of 2.2%, 5.7% and 5.9% respectfully. As we can see recovery is continuing, some constraints are ahead like new regulations for credit will affect the recovery but are inevitable to prevent another crash.
El Paso
It seems that with so much unemployment in the U.S. one could expect the El Paso community to have lost many jobs. In fact El Paso lost 5,500 jobs during the year of 2009, which accounted for a contraction of 2% in the El Paso labor market and stood at an unemployment rate of 9.7% in Dec of 2009 where Texas stood at 8.3%. Las Cruces at the same time, Dec 2009, stood at 8.5% unemployment. This is a great improvement from the 10.0% unemployment in Oct 2009 and a sign of unemployment decreasing. El Paso gained jobs in education, health services and government where as it lost job in other sectors during 2009. There was government jobs created in order to assist in the expansion of projects such as Fort Bliss, which was a great benefit to El Paso and off set the recession, along with the maquiladora industry should help El Paso grow faster than other cities in the U.S. Trade in El Paso has increased dramatically since May 2009 along with El Paso housing sales up by 22% in Dec2009 for the 5th consecutive month, considering the first time buyer’s tax credit and immigration from Juarez. El Paso was one the few cities that was the last in to the recession and seems that it will be one of the first ones out due to it large trading economy and housing boom and government projects. Also, El Paso business cycle has started to bottom out since the summer of 2009 and has now been slowly going up.
Sources
http://www.bloomberg.com/apps/news?pid=20601068&sid=al2hTofSgDiQ, U.S. Household Worth Rose at Slower Pace Last Quarter (Update2) By Timothy R. Homan, March 11, 2010
Federal Reserve Bank of Dallas, El Paso Branch Feb 2010, Economic Update, both National and Regional
Dailyfx.com
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Freddy March 23, 2010, 5:48 pm
Great Article! With El Paso’s unemployment slightly below the U.S average and strong construction projects looks like we might leave the recession behind soon. The U.S. Dollar actually strengthened during the recession.. what we failed to see about the Dollar is the pre-recession levels. With the DIX standing at 75 in 2006 we saw buying pressure in late 2008 with the index rising near 90. With huge leverage,there was a selling trend from 2005-2007. This selling pressure disappeared in late 2008 with a 20% increase in the dollar against the currency basket, creating an “overbought” possession which in hindsight had to correct. so our dollar at its 81 level is stronger than the 75 level in 2006-2007.