In the US, automakers and suppliers are the primary economic activity, creating jobs in Wayne, Ind., and Cincinnati, Ky., and scattered around the rest of the country. Auto workers are very important to the economic health of the US. The number of jobs related to auto manufacturing has been falling, however, as more vehicles are made overseas. A better understanding of how the US automobile industry would describe the situation would shed light on why this trend is taking place. It would also show why, even after increasing sales for so long, consumer spending is slowing down somewhat.
In order to understand how the US automobile industry would be described in terms of economics: it would help to look at how firms in other nations make their products. One example would be China. China manufactures cars and other vehicles in a way that most people would find incomprehensible. Most people describe the process by which Chinese manufacture vehicles by referring to it as “making cars in factories.” While that description does provide an explanation of how the product is created, it does not provide a clear picture of how much value is placed on the final product, or how consumers in other nations feel about the final product.
The situation is similar with the US automobile industry: While there are many components of the industry that are located primarily in the US, many of its largest components are located in other countries, particularly Germany and Japan. In fact, most of the components of a typical car, truck, or SUV are manufactured elsewhere in the world, rather than being assembled in the US. That means that the final product – the vehicle itself – is not as valuable to American consumers as some would believe.
Because of the way that vehicles are made: how they are sold, and how they are driven, their value is debatable. For example, a car might have low initial value, but its potential to create value over time increases significantly. The same is true with trucks and SUV’s. Still, even in the case of automobiles, how economists would describe the US economy as a whole is complicated. For instance, the high level of consumer spending in the United States has given rise to a large amount of unsold inventory, and that excess inventory is pushing the value of the dollar down.
Still, even taking into consideration how consumer spending is affecting the US economy: there is no arguing that it is having a negative effect. By cutting into consumer spending, the United States is hurting its own economy in the process. In addition to how the dollar is losing value, the weaker interest rate environment that is the result of lower consumer spending is harming other areas of the US economy as well. In fact, the combination of lower consumer spending and weak growth has led many to dub the economic recovery in the US as a job loss and recession.
How economists would describe: the US economy is certainly a lot more complex than simply saying that consumer spending is hurting the US. One thing that is apparent is that there is a lot of uncertainty surrounding the US economic outlook. While it is difficult to project where the economy might be in the months and years ahead, the current state of affairs certainly does not bode well for the US economy. While some argue that the weak economy is caused by too many people being downsizing, it is also true that the US is suffering from too many consumers who cannot get ahead financially. This in turn is creating a number of problems for businesses both large and small, and the combination of these problems is making the US economy feels the pain of consumer spending restraint.