With this morning's release of the
Bureau of Economic Analysis' (BEA's) first read of our country's Q2 2010 Gross Domestic Product (GDP) numbers (here's Calculated Risk's initial coverage of the story: "
Q2: real annualized GDP growth slows to 2.4%"), I believe it may be said that the statistical facts--while ironically feeding the fires of public uncertainty--relating to the current state of our country's economy are growing clearer by the day:
--Much of the hype surrounding our nation's economic "recovery" in late 2009 was, in fact, a combination of: i.) the effects of the initial government stimulus, and ii.) a post-economic downturn's standard inventory restocking adjustment, wherein manufacturing/industry realizes a bump in production, with ongoing economic growth after this traditional phase still being quite dependent upon any concurrent, ongoing actions of our government and the private sector to facilitate same.
--From Calculated Risk: "The recession was worse in 2008 than originally estimated."'
And, as I noted in my last post, from Wednesday morning, "
Krugman, DeLong, Klein, et al: Permanently High Unemployment," our nation's unemployment/jobless realities, at least from a political standpoint, trump just about every other economic statistic out there. In the meantime, fresh news about another critical economic indicator this morning, and the increasingly pervasive, qualitative realities that this latest information is stoking deflationary fears and overall economic uncertainty...
Q2: real annualized GDP growth slows to 2.4%
by CalculatedRisk on 7/30/2010 08:30:00 AM
From the BEA:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.4 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent. A few key numbers:
-- "Real personal consumption expenditures increased 1.6 percent in the second quarter, compared with an increase of 1.9 percent in the first."
Calculated Risk continues on to note that "...nonresidential structures increased 5.2 percent, in contrast to a decrease of 17.8 percent. Equipment and software increased 21.9 percent, compared with an increase of 20.4 percent. Real residential fixed investment increased 27.9 percent, in contrast to a decrease of 12.3 percent." But, they attribute these temporary bumps to the government's mortgage tax credit, telling us: "Residential investment was boosted by the tax credit and will decline in Q3."
That is probably the end of the inventory adjustment.
--SNIP--
The recession was worse in 2008 than originally estimated...
With common knowledge (and three of the top business ledes in today's New York Times) telling us that "It's the economy, stupid!" the economic story is as much (IMHO, much moreso) a qualitative, political story as it is a quantitative, statistical issue --and make no mistake about it, the economy is the top story of this mid-term election cycle-- today, 18 months into the Obama administration, our nation's economy is ______ (fill in the blank: "very slowly recovering;" "moving forward but quite uncertain at this point;" "still sinking;" "double-dipping into another recession;" "pretty much in the same place it was in late 2008, with a modest shift upward, for awhile, but now on a downward trajectory into who knows where.").
(NOTE: Paul Krugman, IMHO, has written one of his most politically incisive columns in today's NY Times, entitled: "Curbing Your Enthusiasm." But, more about that in a moment. )
Here are three of today's NY Times business ledes...
Growth Is Expected to Slow in 2nd Half
By MOTOKO RICH
New York Times
July 30, 2010
Two steps forward, one step back.
That describes the current thinking about a year into the putative economic recovery.
On Friday, the government will release its report on the nation's output for the second quarter, showing how much, if at all, the economy downshifted as the summer began.
Many economists -- concerned about the sluggish pace of job creation, dwindling housing activity and decelerating retail sales -- say that slowdown is continuing this summer and have recently downgraded their expectations for the second half of the year.
...here...
Within the Fed, Worries of Deflation
By SEWELL CHAN
New York Times
July 30, 2010
WASHINGTON -- A subtle but significant shift appears to be occurring within the Federal Reserve over the course of monetary policy as the economic recovery is weakening.
On Thursday, James Bullard, president of the Federal Reserve Bank of St. Louis, warned that the Fed's policies were putting the economy at risk of becoming "enmeshed in a Japanese-style deflationary outcome within the next several years."
--SNIP--
At the Fed, Mr. Bullard had been associated with the camp that sees inflation, the central bank's traditional enemy, as a greater threat than deflation brought on by anemic growth. Until now he had not been an advocate for large-scale asset purchases to reinvigorate the economy.
But with inflation very low, about half of the Fed's implicit target of 2 percent, and with the European debt crisis having roiled the markets, even self-described inflation hawks like Mr. Bullard have gotten worried about the economy's trajectory...
...and here...
A Down Day Ahead of G.D.P. Report
By SUSANNA G. KIM
New York Times
July 30, 2010
"...The market will be choppy until a package of economic data are emphatically positive," said Quincy Krosby, market strategist for Prudential Financial. "The market is struggling between very solid numbers coming out from companies and macroeconomic data that have tended to be on the weaker side."
After disappointing reports this week on consumer confidence and the sale of big-ticket factory products, Marisa L. DiNatale, an economist with Moody's Analytics, said her firm lowered its forecast for Friday's G.D.P. to 2 percent, 1 percent less than its forecast a few months ago. Most surveys estimate that the economy grew in the second quarter by about 2.5 percent.
Ms. DiNatale said that the continued weak employment picture and the fact that much of the federal stimulus spending had run its course contributed to the decision to lower the forecast.
"Businesses' earnings are doing well but they're investing and not hiring," she said. "Hiring is still quite weak."
Here's Krugman (whom, IMHO, has been spot-on for quite awhile, at least moreso than most) from Wednesday evening:
We're Number One!
Paul Krugman
NY Times Blog
July 28, 2010, 8:28 pm
...The truth is that this really is the big one. Catherine Rampell recently updated the recession comparison chart, showing declines in employment. Here's the percentage decline in employment in recessions since 1970:
CHART: Recession Comparisons: % Decline In Unemployment (Recessions Since 1970) NY Times
--SNIP--
But wasn't the unemployment rate higher in the past? Well, in 1982, although not in the 1970s, it was briefly a bit higher than the peak this cycle:
CHART: Civilian Unemployment Rate (UNRATE) St. Louis Fed
But back then the "full employment" level of unemployment was higher, so the increase wasn't as large; more important, most of the unemployment was short-term, nothing like the deeply corrosive long-term unemployment we're facing now:
CHART: Median Duration of Unemployment (UEMPMED) St. Louis Fed
So these really are the worst of times.
And, here's Krugman, today, bringing together many themes upon which I've also focused over recent weeks...
Curbing Your Enthusiasm
By PAUL KRUGMAN
NY Times
July 30, 2010
Why does the Obama administration keep looking for love in all the wrong places? Why does it go out of its way to alienate its friends, while wooing people who will never waver in their hatred?
These questions were inspired by the ongoing suspense over whether President Obama will do the obviously right thing and nominate Elizabeth Warren to lead the new consumer financial protection agency. But the Warren affair is only the latest chapter in an ongoing saga.
Mr. Obama rode into office on a vast wave of progressive enthusiasm. This enthusiasm was bound to be followed by disappointment, and not just because the president was always more centrist and conventional than his fervent supporters imagined. Given the facts of politics, and above all the difficulty of getting anything done in the face of lock step Republican opposition, he wasn't going to be the transformational figure some envisioned...
--SNIP--
...Then there are the appointments. Yes, the administration needed experienced hands. But did all the senior members of the economics team have to be protégés of Robert Rubin, the apostle of financial deregulation? (Krugman's column continues...)
(Diarist's note: This really is a must-read, IMHO.)
So, there you have it. The plain, hard facts. And, as we've been told, the "things could've been much worse" meme isn't going to cut it for a mid-term slogan.
Again, I covered much of this matter, prior to the latest qualitative and quantitative round of analysis over the past 48 hours, early Wednesday, in: "Krugman, DeLong, Klein, et al: Permanently High Unemployment."
But, the numbers are coming in faster, and they're all confirming what we're now hearing more frequently among the MSM punditry, as well (even prior to these latest supporting facts coming to the fore). From the NYT's Bob Herbert, on Tueday morning...
Long-Term Economic Pain
By BOB HERBERT
New York Times
July 27, 2010
The pain coursing through American families is all too real and no one seems to know what to do about it...
--SNIP--
"...If anything, we're understating how bad things are out there right now."
Policy makers seem bewildered by the terrible economic state of ordinary working Americans, including those once considered solidly in the middle class. Despite warnings back in 2008 that we were on the verge of another great depression, the big financial institutions and corporate America seem to be doing just fine now. But average Americans are hurting with no end to the pain in sight.
More than 14 million people are out of work and many more are either underemployed or so discouraged they've just stopped looking. Big corporations, sitting on fat profits even as the economy continues to struggle, have made it clear that they are not interested in putting a lot more people back to work any time soon.
Policy makers have dropped the ball completely in terms of dealing with this devastating long-term trend of ever-increasing economic insecurity for American families. Long-term solutions that have to do with extensive job creation and a strengthening of the safety net are required. But that doesn't seem to be on anyone's agenda.
So, what, if anything, is curbing your enthusiasm this election cycle?
(The reason my enthusiasm's "curbed" may be summarized in the last paragraph of Herbert's column, which I noted in bold type, immediately above.)