Macroeconomic Indicators in the American Manufacturing Sector
Introduction
The North American Industry Classification System is a classification system that is designed to group economic production with similar processes into an industry. This framework also defines the lines on why an industry is different from another, such that there is clarity in the difference in industrial processes. This kind of classification enables the collection and publication of economic information on industrial inputs and outputs important for constant and consistent statistical use. The NAICS divides the American economy into at least 20 sectors. The manufacturing sector is the sector of choice in this discussion, with every intention to discuss the industry’s size and growth rate in the American economy, an economy perceived to have the strongest Gross Domestic Product in the world.
The Manufacturing Sector
The manufacturing industry is made up of establishments mainly characterized by the use of plants, factories, and mills. However, the NAICS goes on to include establishments that transform materials into finished goods. Finished goods are goods that are ready for utilization or consumption. In the past, the manufacturing sector was characterized by a populated labor force, unlike today when most of the sector was highly mechanized. Despite these changes positively impacting the production of the industries, it has led to high unemployment within the United States. The government must protect its citizens and also to maintain a growing economy, taking into account that the manufacturing industry contributes up to 12% of the American Gross Domestic Product. This requires that stringent measures are put in place to serve both the economy and the people.
These economic production measures are taken through having macroeconomic policies. To address the level of unemployment, the American government has introduced tax cuts to ease the manufacturing sector and increase their disposable income. A higher disposable income suggests that the American Industries will have more money to employ more people and also to invest more money in secondary business ventures (Kugler, 2019). The American government using taxation as a macroeconomic policy has been able to maintain its employment and industrial growth rate in the past years.
According to the Bureau of Labor Statistics (2020), the unemployment rate in America stands at 14.7 percent. This is the highest rate of unemployment in the American economy. The GDP of America is still the highest in the world, and the world bank estimated that the Gross Domestic Product in the United States to be worth 21.2 trillion dollars as of 2019. The total GDP of the United States is 17.5 percent of global GDP (Kugler, 2019). However, in as much as the numbers do not lie, the United States still has issues with the growing rate of unemployment, and the effect of high taxation on low-income earners. The biggest problem in America remains to be the low balance of trade, and estimates on United states trade deficits show that they import 0.6 trillion more goods than they export in the last one year (Schott, 2010). Addressing the need to promote domestic consumption will strongly impact America’s future economic growth.
Conclusion
To recap, under the current macroeconomic indicators on the rate of unemployment, which has gone up to an average 4% in the last two years and mostly made up of black and the Hispanic community. The American government has more to do in addressing the level of unemployment. However, the policies aimed at improving the manufacturing industry through taxation and money interest rates will gradually improve the manufacturing sector, and in turn the American economy. The United States needs to encourage the consumption of domestic products in a bid to reduce the level of imports to the country.
References
Kugler, A. D. (2019). Impacts of labor market institutions and demographic factors on labor markets in Latin America. International Monetary Fund.
Schott, P. (2010). US manufacturing exports and imports by SIC or NAICS category and partner country, 1972 to 2005. Notes.Schott, P. (2010). US manufacturing exports and imports by SIC or NAICS category and partner country, 1972 to 2005. Notes.Schott, P. (2010). US manufacturing exports and imports by SIC or NAICS category and partner country, 1972 to 2005. Notes.