In recent congressional testimony, Federal Reserve Chairman Ben Bernanke described a major issue for the U.S. economy. He asked if the labor market is undergoing a sustained recovery, or if "we are stuck in the mud."
According to the Commerce Department, during the last quarter ending in June, U.S. economic growth fell to 1.5 percent, from 2 percent during the first quarter. For the third year in a row, the recovery from the last recession has again slowed down in the spring.
Besides external factors, such as the European recession and the slowdown in China, several domestic factors are contributing to the U.S. slowdown. Personal consumption declined from 2.4 percent in the first quarter to 1.5 percent in the last quarter, while inventories unexpectedly increased, indicating businesses will spend less in the coming months.
Also contributing to the slowdown is the fact that federal spending and investment, both civilian and military, has fallen 3.4 percent in the past year. Consequently, employment by the federal government has decreased by 52,000 jobs, also in the past year.
Additionally, federal funding for state and local governments is also falling, from $180 billion during both fiscal years 2010 and 2011, to $20.8 billion during fiscal year 2012. The projection for fiscal year 2013 is that federal funds for state and local governments will continue declining, to $14.3 billion.
Isaac Cohen is an international analyst and consultant, commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.
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