Industry Analysis for Effective Decision Making

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Introduction/Definitions

Determination of the U.S. in the business cycle

To provide an informed recommendation to Allan, the position of the United States in the business cycle can be determined by analyzing the following economic indicators.

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Source: U.S. Bureau of Labor Statistics

The impact of national inflation on the cost of living

In simple terms, an increase in the rate of inflation means that the prices of goods and services have increased and therefore households have to pay a higher price for the same services and goods. From figure 3, the country’s CPI indicates that the inflation rate has increased for the last 12 months. This has a negative implication on the disposable income of Algration’s employees because their purchasing power has declined. The increase in the cost of living while their salaries remaining constant implies that the employees are dissatisfied with their jobs and therefore are less motivated. This translates to decreased productivity. 

The rate of unemployment has declined for the last 12 months in New York as illustrated in figure 5 which means that more Americans are employed. While this may be a good thing for workers, it cannot be said to be the same for employers such as Algration. For businesses, when the rate of unemployment is high, organizations are in a position to determine the level of minimum wage and thus reduce the cost of doing business thereby increasing profitability.

Recommendations to Allan

Fraumeni, B. (2017). Gross domestic product: Are other measures needed? IZA World of Labor. Doi: 10.15185/izawol.368

Jiang, H., Habib, A., & Gong, R. (2015). Business Cycle and Management Earnings Forecasts. Abacus, 51(2), 279-310. Doi: 10.1111/abac.12047

U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average [CPILFENS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPILFENS, December 11, 2019.

U.S. Bureau of Labor Statistics, Unemployment Rate in New York-Newark-Jersey City, NY-NJ-PA (MSA) [NEWY636URN], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/NEWY636URN, December 16, 2019.

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