First Quarter 2012 GDP At 2.2%
News on the economy today and it’s looking increasingly like the happy surprises which characterized the end of 2011 and the beginning of 2012 were aberrations. We’re back to Anemia Now!, unfortunately:
The economic output of the United States grew at an annual rate of 2.2 percent in the first quarter of the year, easing from the prior quarter’s growth rate of 3 percent but maintaining what many economists have started to call a “sustainable” pace of recovery.
The economy has been growing, though painfully slowly, since the second half of 2009, and the recovery accelerated throughout all of 2011. Early this year, economists forecast a weaker showing for the first quarter, and many revised their numbers upward in the past few weeks as several economic indicators came in better than expected.
Still, mixed signals continue to cloud the picture, raising fears among some economists of a repeat of last year’s spring slowdown: shipments of durable goods increased last month, but new orders showed their steepest drop since January 2009 (mostly because of a decline in aircraft orders); the trade balance improved but job growth weakened and new unemployment claims have risen. …
In the long term, the Fed said it expected unemployment to fall very slowly, remaining as high as 6.7 percent by the end of 2014. “The committee expects economic growth to remain moderate over coming quarters and then to pick up gradually,” a Fed statement said.
Growth of 2.2 percent is too slow to make up for lost ground. “I don’t think the issue is whether or not the growth rate is sustainable,” said Steven Blitz, chief economist of ITG Investment Research. “I think the question is whether the growth rate that’s sustainable is acceptable — politically and socially acceptable.”
Before getting to Blitz’s comment, which I think is the central overarching question (at least politically) of this new economic era, let’s take a look at why, exactly, the economy is still so damn lethargic. Alan Krueger, head of the Council of Economic Advisors, the economic brain-trust of sorts to the President, released a statement through the White House’s blog, saying that — wouldn’t you know it — Big Government is to blame. Lack of Big Government, that is:
Overall GDP growth was weighed down by reduced spending in the government sector, however. National defense expenditures, one component affecting today’s report, fell by 8.1 percent in the first quarter, according to the Bureau of Economic Analysis. Government spending across all levels subtracted 0.6 percentage point from overall GDP growth. The latest report continues a pattern of moderate growth in the private sector components of GDP and contraction of the government components of GDP. …If only the private sector components of GDP are considered, GDP grew by 3.5 percent in 2012 Q1.
Krugman concurs, calling ours an era of “unprecedented austerity.”
Here’s what’s problematic, though — at least from a liberal’s perspective — about making a big deal about government shrinkage hurting the economy; according to Karl Smith, the biggest drag is coming from reduced military expenditures:
Federal Government: Subtracted 0.46 pts. SMACK. That is much bigger than expected and almost all comes from military drawdown. Two big quarters in a row of shrinking military expenditures.
State and Local: Subtracted 0.14. Surprisingly high and looks like its coming from lack of highway investment. What the political endgame on that is I don’t know.
Of course, this doesn’t mean that you still couldn’t advocate more government spending but specify that it be directed somewhere other than the military sector. But it’s just worth keeping this in mind — big government and big military often go hand-in-hand. It was government spending on WWII that ended the Great Depression, after all.
Anyway, turning back to Steven Blitz’s comments on how we’re about to find out what’s “acceptable.” Without getting into the details, I don’t think what we’re experiencing right now is likely to change anytime soon — at least not for the better (we’ve got other financial panics to look forward to, of course; and the eurozone may yet kill us all). So absent a real pseudo or full-blown revolutionary movement in the US, this new normal is going to be accepted sooner or later. The real question for 2012 is whether people are going to accept it sooner and reelect President Obama; or later and delay the inevitable long enough so President Romney gets his share of the collective tantrum that’s defined much of Obama’s first term.
We live in cheery times.
It’s true that it may not be politically and socially acceptable, but I’m not sure anti-austerity or Keynesianesque policies are going to be politically and socially acceptable, either. So where does that leave us?Report
One hell of a lost decade. Again.Report
It leaves us with the unavoidable prospect of increasing delegitimization of the prevailing economic order.Report
True, so maybe we’ll finally move in a truly libertarian direction.
Wait, that wasn’t what you mean? 😉Report
I suspect it won’t move in the direction that libertarians or the left want. Neither is where the real money is.Report
Ha!Report
I think libertarian in the broad sense of anti-authoritarian, but if you think a significant re-reckoning of the distribution of wealth isn’t around the corner, you’re whistling past the graveyard.Report
if you think a significant re-reckoning of the distribution of wealth isn’t around the corner, you’re whistling past the graveyard.
My own personal beliefs about what ought or ought not happen aside, I’d be willing to wager that as an empirical matter this won’t happen. If all you mean is that we might increase tax rates back to Clinton or Reagan levels, sure, I think that could happen. Or a shift to a true single-payer national health care plan, I wouldn’t be surprised. But if you mean some kind of fundamental structural change in our system, whether it be back to 90%+ top marginal tax rates, or eliminating private capital (or even putting real constraints on private capital accumulation), I’d say–in line with Chris–that’s fully as likely as moving in a truly libertarian direction.
It just ain’t gonna happen. We’re going to continue to muddle through with marginal changes.
And my bet is that as long as we get our debt under control, we’ll continue to grow and get wealthy again with no major changes.
But if we don’t, well, look at what happened in New Zealand when they didn’t. Their major restructuring went much more in the direction I like than the one you like. So advocate your preferences by all means, but don’t get too cocky about the future going your way.Report
You know, there are less dramatic ways to effect “significant re-reckoning” than the abolition of private capital. I think what’s most likely is a reorganization of the banking system: The possibility of a syncretic movement of traditional anti-finance leftists allied with burgeoning anti-Fed tea party types seems very real.
But whatever the form it might take, a reorganization is coming. The last time there was this much inequality in America, it led to an enormous resurgence of socialist and communist politics, which tide was only stemmed by the significant reckoning of the New Deal. And I doubt that even in the ’30s voters thought more highly of a communist revolution than Congress. The political legitimacy crisis is not perfectly coextensive with a desire for greater equality, but if you don’t think there’s a lot of overlap, I have to question how much time you spend among the young or the lower classes.Report
The possibility of a syncretic movement of traditional anti-finance leftists allied with burgeoning anti-Fed tea party types seems very real.
No, it doesn’t. The only such movement would be wing-nut tea party types gunning down the lefties.
The last time there was this much inequality in America,
Almost nobody in middle cares about inequality. They care about whether they can pay the mortgage and don’t care how much other people make. Come on down to my SE Michigan county–it’s got a 9.8% unemployment rate, significant underemployment, and you still have to wait an hour to get a seat at Applebee’s on the weekend. These people don’t want any major reorganization and they’re not going to ally with the left.
I have to question how much time you spend among the young or the lower classes
I’m a college prof in a dying blue collar town who bought a house in a lower middle class neighborhood. I’ll bet I spend at least as much time with the young the economically struggling as you do, if not more.
I’m not shitting on your parade because I don’t like the vision. I’m shitting on your parade because I look around very carefully and I see it’s got no traction. I’ll tell you this; there was even more fear about the future back in the 1970s, and the result was we elected Reagan because he was an optimist. Not arguing it was the proper response; just pointing out that in fact it was the response.Report
That second paragraph of mine should read “middle America.”Report
I wouldn’t be so quick to dismiss that syncreticism out of hand. I mean, you had the recent (but temporary) Paul-Grayson anti-Fed alliance.
But on a deeper level, the current political alliance between, for example <a href=”http://www.dailymail.co.uk/news/article-2134196/Pictured-The-modern-day-poverty-Kentucky-people-live-running-water-electricity.html?ITO=1490″>Owlsey County, Kentucky</a> and Ben Bernanke, is deeply ahistorical – insofar as they’re both going to be voting for Mitt Romney this fall. (and voted for George W Bush before that).
In other words, the fact that Jacksonian exurban yeoman are now Republicans and Northeast urban bourgeoisie are now Democrats is very weird – and likely unsustainable over another generation. What will replace it? I don’t know. But I would bet on most of the cards in the deck being reshuffled and redealt, and emerging with two very different political alliances – as different as the current ones are to the early 20th century versions.Report
I think you’re ignoring the unprecedented financial chasm between younger and older generations. Reagan could win the youth vote because in 1980, young people weren’t expected to get a college degree and work unpaid internships for six months before being considered employable. Back then, the minimum wage went a lot further, inequality was nowhere near what it is now, and social mobility was much higher. Also, there wasn’t as much cultural interchange between black and white youths in the ’80s, which you might expect to have suppressed the appetite for class warfare.Report
Robert,
“Unprecedented financial chasm.” I think that’s more rhetoric than anything else.
And I wasn’t talking about Reagan winning the youth vote–the youth don’t vote. Everyone talks about the Obama youth vote, but it was only 2% points higher in ’08 than ’04 (most of that increase coming from younger blacks). (Source.)
Time will tell, but I lived through the Carter ’70s and the Reagan ’80s. I remember thinking that the ’92 election was phenomenally crucial, and now I realize it meant almost nothing. It’s easy, particularly when we’re younger, to think that the crisis of the moment is going to lead to major change, but it rarely does.
And I’m very sincere when I say be careful what you wish for. The odds that a major change will go the way you, or I, or anyone else here, wants it to go are very very slim. Try for any kind of radical left-ward change in this country right now and the guns might very well come out. We’ve got assholes talking about “the 2nd Amendment solution,” and some of these folks are damned serious. Some of them call themselves tea partiers, but there’s no way in hell they’ll ever join forces with the left. These are folks with their own arsenals, their own bullet-making equipment, and real knowledge of how to make IEDs out of a few household chemicals in the proper proportions.
Maybe I’m just getting old, but I’m pretty goddamed pessimistic, and I think you’re mistaking hope and theory for the world on the ground.Report
“I think that’s more rhetoric than anything else.” Not really. The net worth of the typical 25-year-old has decreased markedly relative to to the worth of the typical 50-year-old. I’m surprised that you’d contest this, as a college professor: Most of the reason for this increased disparity is that people need to stay in school longer, and schooling has gotten more expensive.
I agree that the youth underperform at the voting booth, but I don’t see how that’s germane to my original point, which is that Reagan did well among the younger crowd (and I’m including more than just the very young here, more like 18-35) in a way that’s totally unavailable to Romney.
Regarding the possibility of a left-Tea-Party syncretism, I think you overestimate the degree to which the Lockean attitudes of the rural white population protects the “1%”. Tea Partiers may focus more of their ire on the latter part of the big-business/government nexus, but most of them will tell you that such a nexus exists, and that the private sector element of the American aristocracy is still a problem. Think of how often and how virulently Tea Partiers rail against the private industry of Hollywood, for example, or the disdain many Middle Americans feel for the CEOs who ship jobs overseas — they’re perfectly capable of despising economic elites outside the government. Romney is only doing as well as he is in rural America because Obama is so feared there; if a white economic leftist were in office (imagine an alternate universe where John Edwards isn’t a total skeeze), Romney would be losing by fifteen points or more.Report
All that just to play the racism card? How anticlimactic.Report
It’s more than race, of course. The other glaring difference between Edwards and Obama is that Edwards has a greater claim to being culturally Middle American. Sorry, I should have been more clear.
But if you don’t think race is part of the equation, I want you to give me another reason why Hillary Clinton was polling twenty-five points higher in West Virginia against McCain than Obama.Report
RACE CARD!*
*Note: My saying race card licenses me to ignore anything you’ve said. Gold teeth! Scary black man!Report
Owsley County, KY
R Bush; Cheney 1,466 80.3%
D Gore; Lieberman 339 18.6%
—
R McCain; Palin 1,279 75.9%
D Obama; Biden 381 22.6%
It ain’t about the race of the current President, Mr. Greer. (not that race isn’t a factor in the bigger picture)Report
Robert,
There’s lots I could critique there, but I’ll just leave it at this. I’m willing to bet you’re talking about rural America from the perspective of a person who’s lived a predominantly urban life, as someone who’s never actually identified with rural life. Correct me if I’m wrong, of course–I’m assuming, and I’m aware of the danger of that.
But as someone born and raised in rural America, who lived in big cities for a few years, and is now back in rural flyover country, I feel confident saying you don’t have a good understanding of these folks. I’m not critiquing your left-leaning theory, understand, but I am saying that if you came to my county you’d find damn few takers, and my county is very representative of rural America as a whole, poorly educated, low median-incomes, high unemployment rate. The county went for Obama in ’08 51%-46%, and swept in a center-left Democratic congressman. 2 years later he was out on his ass and the same religious right-winger we had before reclaimed his office. Guns, God, Gays, and, um, fetuses, still outweigh Gold with these folks. If you’re anywhere in the region, come for a visit. I’ll put you up and take you out to meet these folks. There’s nothing quite like getting your feet on the ground to see how people really feel about things.Report
FYI, I agree with Robert that Obama’s race is a factor. But these folks don’t like white leftists that much, either.Report
James, I’m not denying that cultural issues are often paramount for these voters. But economics is not totally unimportant, and because social conservatism is rapidly becoming a less potent political force (in part because of the urbanization of America, but also because of the prevalence of telecommunications), I see reason to expect more clamoring for equality. Of course this clamoring will be tempered by the general Lockean strain you’ve been talking about, but those considerations never mapped well to the self-justifications of the 1% in the first place.
As far as my background, I grew poor in Bakersfield, CA — which, although it’s become more suburban in the past twenty years, nevertheless exposed me to a fair amount of rural political culture. I was one of four liberals in my high school civics class (of forty kids); my family went to a fundamentalist “non-denominational” church in the hometown of Merle Haggard and Buck Owens for a few years (my sister still lives there); for a few summers I made industrial deliveries to farmers and worked in the oil fields with some toothless good ol’ boys; I’ve worked on political campaigns in exurban Nevada and rural Ohio; I lived in rural New Mexico (a.k.a. West Texas) for a few years when I was young (I’m close with my relatives who still live there, as they took my family in when we were on hard times)… I don’t feel totally unqualified to speak here, but I guess I prejudged your relation to the young and the poor so I’m not one to get high-and-mighty here.Report
Here’s an except from a letter written by a Santorum caucus leader:
Romney wants everybody to quit. Quitting may be his solution when his back is up to the wall, but it’s not what we want from our leaders. Our country has it’s back up against the wall! We need principled fighters and not a pretty boy in a suit. We nominate Romney and it’s the equivalent of making him the starting quarterback because he simply looks good in the uniform. He’s a defensive coordinators dream. The mere fact he wins in the same places liberals do in the general election says a lot.
At some point, and it might as well be now, people are going to reign back power from party leaders, unite and actually make something like a Paul/Santorum unity slate work. As I see it, it’s the only way to balance power, restore it back to the people and take it away from big money.
The desire for a “Paul/Santorum unity slate” is admittedly pie-in-the-sky, but I think the Middle American variant of anti-“big money” sentiment is underappreciated by the people who say America lacks class divisions.Report
Robert,
OK, Bakersfield ain’t exactly rural, but it ain’t exactly not, either, so I retract my assumptions. And let’s celebrate a nice moment of karmic togetherness, as I, too, have walked the streets of Bakersfield, being an alum of CSUB ’94 (Go ‘Runners!). I have a great fondness for Baketown, and I now like you even more, despite our disagreements, for being from there.
“How many of you that sit and judge me
Ever walked the streets of Bakersfield”?
Report
Another ‘Runner — no shit! I studied polisci/philosophy there for a year. Glad we could find common ground, James. Cheers!
By the way, if Bakersfield doesn’t count — although I’d argue that despite its increased urbanity, Bakersfield largely retains a rural political mentality, especially in certain areas like Oildale — I have other places to submit: I spent kindergarten and first grade in Chaves and Cibola Counties in New Mexico, which have population densities of 11 and 6 people per square mile.Report
Dude, Bakersfield totally counts. Especially if you lived there before they had a hockey team.
“What do you have if you have a room full of Oildale women? A full set of teeth!”
So which political science profs did you have in your year at CSUB? I see Stan Clark’s still there–he’s a bit of an odd bird, but a really good guy. And I’m still close friends with Charles McCall, who retired a few years back. And there was a women who did comparative politics whose name I should remember but can’t, who seems to have left in the last few years. She was good, but I could never really understand her–only deep into grad school did I realize it was because she was pretty social constructionist. But she was a good person, too. They were all good people. I loved my time there.
Report
Dominique Apollon, who I think has since left, and Mark Martinez. Both great profs.Report
The butterfly regulator is broken in Grandfather’s Clock and the pendulum is banging against the sides of the clock case. The whole clock is tottering from side to side.
There was just such a reformer in the form of Teddy Roosevelt, a genial despot who broke apart the trusts and built the Panama Canal et. al. TR passed the Pure Food and Drug Act and got the UMW to stop their strike in exchange for better wages and fewer hours.
Forget all this tax and health care nonsense. That’s just band-aids on a tumour. From what I see, the power of the Executive is growing by leaps and bounds. The Republic is coming apart at the seams for the simple reason the political system hasn’t evolved since the country had a quarter of its current population. There will be huge changes. The veneer is peeled up enough and the country is angry enough to demand (and get) another Teddy Roosevelt.
Getting our debt under control is an interesting proposition but you’ve got it exactly backward. Clinton ran surpluses because the economy was doing well and tax revenues increased as a direct result. It’s a noble goal to cut taxes but we’ve had eight years of that under Bush43. It didn’t work: we got lower taxes — and the economy farted, collapsed and damned near died.
While there’s a fine and sensible point to be made about government efficiencies and making the tax burden less-onerous, let’s not indulge in these little Tea Party fatuousities about how lowering taxes makes the economy grow. It just doesn’t. The economy grows for its own reasons, most of them beyond the ability of government to control.Report
State governments account for a ton of layoffs. I think the number I saw was a public sector shrink of about 1.3 million all told since Obama took office. (The population has grown since then, so just keeping pace would add jobs).
Texas laid off tens of thousands of teachers alone, and go knows how much support staff. That’s just in education.
How would the economy be doing if 1.3 million more people had jobs?Report
In the past 3 months, we have had a 33 billion dollar stimulus added to the economy (numbers courtesy of mp over on Calculated Risk), due to lowered utility bills.
Kinda makes this liberal ask — Conservatives: If pursuing Keynesian Stimulus did NOT require more government debt, would you be for it?
I kinda think that (like war bonds) there are ways that we can stimulate the economy ourselves. Savers can push prosperity…Report
You don’t think war bonds are debt?
Or am I misunderstanding you?Report
yup. totally. Warbonds were to fix rampant, unchecked inflation. You’d want some easy loans to consumers (Keystone HELP’s CAPP springs to mind) to fix noninflation.Report
*blink* That’s not Keynsenian stimulus at all. For one, it’d be an absolute wash — people might have saved 33 billion, but that was 33 billion they didn’t spend — or just spent on other things. Net increase? 0. Actually less than zero, given the current average debt overhang. People might have paid down personal debts with the freed up savings, resulting in a negative stimulus.
This is like…high school economics stuff. Maybe econ 101 stuff. Keynes isn’t exactly rocket science in it’s basic theory (application is another thing entirely, as is trying to determine how much is doing what and where) but what you just did was “assume a spherical cow” level of theory, not “model the thermodynamic properties of this cow in this field after ingesting that meal” sort of complexity.
Keynesian stimulus requires deficit spending — ie, the spending of money that would not ordinarily have been spent, to counteract the drop in spending from people who stopped having money to spend. A 33 billion shift from one spending to another isn’t even remotely stimulus.Report
sorry. I typed way too quickly. What I’m actually suggesting is increasing the money supply through the government providing low-interest unsecured debt (Look at the Keystone HELP CAPP program. seriously.)
Or, if not the government, then some other entity (*cough* bank*cough*). I mean, seriously, getting a loan nowadays is fairly much cheaper than normal. Why aren’t we trying to get people to take out loans?? (if the gov’t can shill for warbonds, can’t they shill for something smarter?)Report
Individuals are far more constrained by financial decisions than governments.
And your loan idea WAS done. What do you think the Fed is doing by holding rates so low? by trying to — in desperation — manipulate long-term rates? (Quantiative easing). The problem isn’t an inability to lend — it’s an unwillingness to lend.
The American system has been awash in cheap money and basically interest free loans for two years now. But the banks are hoarding cash (partially due to economic conditions but mostly do to exposure to what Atrios so charmingly dubbed “The Big Shitpile” — you know, the collection of supposedly AAA stuff that was the basis for their reserves that might not be so AAA) and no one is borrowing. Further complicatign the problem is that individuals, by and large, are paying down the debt they incurred fueling what little booms there were in the Bush years. the last 8 years of economic growth were pretty much entirely debt fueled — credit cards, home equity loans, and a real estate bubble.
In programming terms, I’d compare it to a deadlock — everyone is waiting for everyone else to go. In economic terms, it’s called a liquidity trap. The only way out is either a great deal of time and pain — or for a really large player (government *cough cough*) to basically step up and spend enough to get things started. The Fed could technically do it — committing to a 4% or 5% inflation rate for five or so years might work as well.
The government borrowing at 2% and building a ton of bridges (or, you know, stuff) is easier and simpler.
Although mostly the government did too little in 2008 (basically about as much as needed to counteract all the states belt-tightening, in Keynsian terms — and that’s not hindsight. Krugman, for instance, was screaming it from the rafters at the time and he wasn’t alone.) because it was all they could get through the Senate, and after 2010 it’s not like ANYTHING got through the Senate.
Most dysfunctional branch of government EVER.
Also, i kinda think a bunch of people remember Stagflation and it’s really coloring their views. recessions since have been handled by the Fed, fairly nicely. Stagflation was just ugly, and I suppose was one reason for the Invisible Bond Vigalanties. How on EARTH they expected an inflationary spiral with dropping wages is beyond me. You need a feedback cycle or just flat-out dumping real cash into the economy. You know, shoving the printing presses (Fed controlled) to max.
Screwing around with interest rates can expand the money supply in a sense, but it’s not fully…real (for lack of a better term. Perhaps ‘only temporary’ is better) and while there’s some actual small lingering expansion, it’s peanuts. It’s more of a loosening, rather than an increasing, and the markets price that in easily. What the Fed doeth with low rates they can undo with high, and everyone knows it.Report
It’s a good point you make (all of them, really).
Guess I must be getting desperate.Report
Funny, Wiki describes war bonds as “debt securities.” The gummint borrows $$ from people, and then owes them that money back plus interest–which among normal folks is called “debt.”
The U.S. began issuing war bonds in 1941 (prior to Pearl Harbor). The inflation rate in 1939 and 1940 was -1.4 and 0.7, respectively, and in 1941 was 5%, a bit high, but hardly “rampant and unchecked.”
And borrowing money to stop inflation is a bit odd, when all the government actually has to do is ratchet up the interest rate (although, granted, economists had forgotten that in their temporary fascination with Keyenes, until Uncle Miltie reminded them of it after the war).
I swear, Kimmi, you find more ways to be wrong than anyone I know. You are endlessly fascinating.Report
man, yeah, I really must be losing it. (as I read that wiki yesterday… apparently less throughly than you).
[I wasn’t trying to say that they were a good idea, just that they weren’t what I was talking about– to be clear, which I must admit sometimes takes two tries with me]Report
I had always heard of ‘war bonds’ explained that way though. I mean they’re debt like any other debt, but the specific marketing of them as ‘war bonds’ (a ginormous marketing effort, mind you) had two second order effects
1) helping to keep interest rates lower by pushing the demand curve up
2) getting a place for, due to the war economy, the newly employed populace to stash their rising wages that helps dampen inflationary pressures by keeping that money from sloshing all over the general economy – especially mitigating consumer spending on the limited ‘ordinary’ goods.
I thought a singular feature of Japan was a huge GDP / debt ratio but with most of it is kept as domestic ‘retail’ debt. Pretty much the same thing as ‘war bonds’, but without the whole death and destruction thing – and in fact, probably contributes to the general *deflationary* pressure that the BOJ hasn’t been able to print it’s way out of in near 2 decades now.Report
I read that wiki yesterday… apparently less throughly than you).
I only read the first 5 words…Report
I’m waiting for Barry to announce that this is all Bush’s fault.Report
Because the Codpiece Commander didn’t leave a boatload of debt. It’s obvious that you didn’t look at the chart.Report
Not a great number. But I’d like to urge everyone to take a breath. It’s not quite as catastrophic as this thread and the OP make it sound.Report
…I’d like to know more specifics about exactly what that military spending reduction consists of (and if I was less lazy I could obviously find out). It strikes me that it is likely reflective of a reality that obviously can’t be represented in the top-line number alone (because it equates all spending and doesn’t differentiate what the spending is on or who does it, even in the crudest ways) – a reality that we should be rather happy with (the GWOT state perhaps beginning to slowly recede a bit at least in its foreign mil-ops component). And, as a reflection of the broader economy, this perhaps should make feel a little better about the top number. But I’d have to know more to be able to say that for sure.Report
Actually by international standards it’s pretty good, but then the US tends to bounce back quickly from recessions.Report
…Well. I don’t know if I’d exactly call this number part of a quick bounceback from the 2009 recession. But yeah, it’s okay, unless it gets revised downward and actually turns out to be part of a pronounced slowdown. But we don’t know that yet.Report
Talking to a quant I know, the GDP numbers are a sum of many odd additions and subtractions. Domestic housing is doing surprisingly well: for all those unloved homes in Atrios’ Big Shitpile, alluded to above by Morat, new homes are being built. On the downside, business construction is a mess.
Inventories are doing well but some firms are dying. Stocks are up but trading is thin. Profits are up but businesses aren’t expanding: they’re just holding onto cash. Firms aren’t doing much with infrastructure or software, those markets are holding their own but just barely. As firms are retrenching, the market has seldom been better for high-value consulting talent. Good for me, bad for people who want to be employees. Lots more fixed-bid work out there, a market I refuse to participate in any more, though I’m tempted.
Consumers are paying down debt and they are spending a little more, which justifies those inventory gains but durable goods sales are horrid.
Hard to say what’s going on in what’s left of the auto industry: lots of profits are overseas sales. Aircraft, same story, always an export-dominated industry, airlines are taking delivery of new airliners.
The best part of the picture is America’s Not-Dead-Yet balance of trade problem. As the dollar falls, we’re able to sell abroad. A bizarre winter followed by a bizarre spring, the Sept 2012 corn contract has traded as high as 720 and now trades in the low-to-middle 500s. Oct 2012 cattle contract has taken a pounding, too, with the Mad Cow episode: I’m not looking for a great export market in either cattle or hogs. Nov 2012 RBOB on CME has traded as high as 3 and as low as 2 over the last month or so, currently at 2.83 but the RBOB Gasoline Physical Future volume, open interest and change is moving down on robust volume and OI.
Summary: absent an asteroid strike, the US economy will putter along, not exactly zooming along but doing well enough to justify more money coming off the sidelines. China’s financial house is a mess: if banks start failing over there, we’re screwed. That’s my biggest worry just now: I’m reading disturbing reports coming out of China about the whole rotten facade falling off the PLA. When everyone realises just how bad things are in China, the dollar will zoom up again, crippling exports.Report
The last time New Zealand experienced 2.2% real GDP growth in one quarter was before 2005. If we were getting figures like yours we would say the recovery was complete.
In nay event I think the real question is not what the 2.2% signifies, but rather the 3.0% from the previous quarter. It may have been a large upward spike in a rising trend (2.2% is still higher than the 1.8% from the quarter before after all. Based on the numbers presented I’d still say you’re on an upward trend. If the next quarter is below 1.8% then you may have cause for concern, though it would still be too early to panic.Report
Completeness is a different question from quickness. There was a quick recovery; didn’t mean to deny that – look at Q409-Q210. I’m just saying this number isn’t really part of that quick recovery.
Whether a recovery is complete I would think could depend on any number of things, just depending on your definition. Can a recovery be complete when productive resources (people in particular) are still significantly underemployed? If so, then perhaps this recovery is complete. Can a recovery be complete when output is still so significantly below trend:
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Completeness is a different question from quickness
As any woman will tell you!Report
As would Goedel. (Or a woman wearing a goedel).Report
Note that these are annualized numbers, whereas the ones in your link appear not to be. That is, our economy didn’t actually grow 2.2% last quarter; it grew about 0.54%, which would be 2.2% if compounded at that rate for a full year.Report
Those numbers are annualized. A 2% quarterly non-annualized growth rate would take care of the output gap real fast.Report
Right. The US numbers are annualized, but the New Zealand ones in James’ link are not, as far as I can tell.Report
Oh, I misread the threading, apologies. I think they are too, though.Report
It says GDP was up 1.4% for the year ending December 2011. The numbers shown for the individual quarters are all 0.6% or less, so definitely not annualized. Also, failure to exceed an annualized RGDP change of 1.3% in either direction in any given quarter over a six-year period strikes me as an implausibly low degree of volatility for any economy.Report
I guess you’re right. I’m having a hard time believing that James didn’t realize it’s an annualized rate that we use as the conversational standard over here, though. Form the chart at the link, perhaps depending on seasonal adjustments, it looks like NZ had likely higher than that rate of growth as recently as third quarter of last year.Report
…But you could be right.Report
Then why does the graph label say “% change from preceding quarter” instead of “% change from same quarter of previous year”? That’s a very strange way to report data.
No wonder I couldn’t understand what the fuss was about.Report
Yeah, that pretty explicitly suggests it’s s straight quarter-over-quarter number, doesn’t it? We just do GDP growth conversations in annualized numbers over here (and we should label charts better to reflect that). You’ll almost never see a quarter’s GDP growth in the U.S economy expressed as the actual amount that GDP grew that quarter. LIke literally, you just won’t see the number printed anywhere in the press (I’m sure it’s there in the government reports, but…).
That’s cuz we’re so awesome, by the way. 😉Report
Well your government can’t do anything else right, why should I expect them to report statistics properly? 😉Report
It’s not percent change from the same quarter of the previous year. It’s basically (CurrentQuarterGDP / LastQuarterGDP) ^ 4 – 1. That is, the quarterly rate of change extrapolated out to a full year. The idea is to be able to compare rates of growth for periods of differing lengths without having to do any math. That is, if the annualized rate of growth for a quarter is 4%, that’s the same rate of growth as an economy which grew 4% in a year.Report