Halfway through a week full of new data on the economy, the news is - once again - mixed, but mostly trending on the downside. Treasury Secretary Tim Geithner talked up the fact that the economy is growing in his Tuesday op-ed piece in The New York Times. The situation is certainly better than it was when Barack Obama first stepped into the Oval Office. But those were exceedingly dark days, with gross domestic product plunging and unemployment rising nearly 800,000 in a single month. We were drowning. Now we're treading water. There's no argument over which is better.
The Institute for Supply Management reported Monday that manufacturing was up in July for the 12th straight month. But the rate of growth has tapered off. Especially weak were new factory orders, which fell 1.2 percent, more than twice as much as expected. And that growth is slowing not just in the States, but also around the world. Personal bankruptcies rose 9 percent last month compared with June 2010 and also 9 percent compared with July 2009. Auto sales rose 5.1 percent in July, a modest showing but better than expected. General Motors did especially well. Pending home sales dropped and are now 18.6 percent lower than in June 2009, which itself was not an especially good month.
The most disappointing news, from the standpoint of an economy 70 percent dependent on consumer spending, was that such spending as well as personal incomes clocked in flat for July, far weaker than the consensus of experts surveyed ahead of time.
"The underlying story that I seem to be saying over and over is that consumers are not feeling good enough to start spending on things that count, such as durables and houses, because the unemployment level is basically so high," said [Chris G. Christopher Jr., IHS Global Insight’s senior principal United States economist]. "And firms don’t feel the need to hire."
"These two things are feeding off of each other," he said. "Someone has to make a break for it. Right now the consumer is actually retrenching so businesses are not going to have the urge to rehire. It’s a Catch-22 situation."
Last week, the announcement of a sharp deceleration in the growth rate as reflected in the gross domestic product for the second quarter prompted Josh Bivens at the liberal Economic Policy Institute to write:
Despite the fact that the economy has now seen four straight quarters of growth, the level of gross domestic product today remains lower than in the third quarter of 2007. If the average post-war path of recovery following recessions had been followed, we would now have an economy that was 7.7% larger than it was when the recession began at the end of 2007. Instead, we have an economy that is 1.1% smaller.
Given the Commerce Department's revisions for the past three years - which Robert Oak at The Economic Populist found astonishing and disturbing - the GDP figure for the second quarter may turn out weaker than the reported 2.4 percent. Some observers are already estimating the revised number could be as low as 1.7 percent.
These kinds of estimates are always a bit dicey. Not something to wager the mortgage on. But if true, and the growing consensus is that GDP in the third and fourth quarters will sustain even slower growth than the second, the chances of the economy generating large numbers of jobs in the next five months are dwindling every passing day.
Speaking of which, the most-awaited news this week comes Friday when the Department of Labor releases its monthly job report for July. If a few hundred thousand Americans are calculated as having left the labor force, as happened last month, the unemployment rate may well go down again since the leavers will no longer be counted. 9.3 percent would certainly look better than 9.5 percent. But it is not as if those workers went poof! They will , however, have vanished from the formulas of the Bureau of Labor Statistics.
Expectations are that about 144,000 Census workers lost their temporary jobs in July, which means the "headline number" will almost certainly be negative. Since Census hires and lay-offs have distorted the overall numbers for several months, all eyes will again be on how many jobs the private sector generated. The consensus of experts surveyed by Bloomberg ranges from 50,000 to 140,000.
If the new jobs number lands in the middle of that range, it will mean the total number of new jobs created for the past eight months barely equals those lost in a single month, January 2009. This fact alone sums up the economic impact on rank-and-file Americans better than almost all those other statistics put together.