- by New Deal democrat
By now I'm sure you've read several analyses elsewhere of this morning's GDP report. I have no desire to duplicate those analyses, but wanted to add a few points relevant to what this means to everyman and everywoman.
1. This is just a preliminary estimate. In two months we could find out it was actually 1% or actually 3%. And there will be even more revisions in a year or two.
2. Assuming the final result is close to this estimate, we have an economy that grew enough in the first quarter to consistently add jobs - so this confirms that payrolls reports from January through March.
3. What "socialism?" Government spending actually subtracted from the result. Nice to know that government austerity ... oh, never mind.
4. Residential investment added to the growth. This is more confirmation that the housing bust has already bottomed. This is very good for the longer term, since residential construction is one of the premier long leading indicators of the economy.
5. Median wage growth in the first quarter was +0.5%. For the last year, median wages have only grown 1.7%. You simply cannot sustain a consumer economy for too long on this kind of paltry growth.
So the verdict is, Ok but not nearly good enough, which pretty much summarizes this recovery which is getting close to 3 years old.
In passing, despite the Pied Piper of Doom's vile description of Bonddad as an apologist for the "status quo," the fact is Bonddad and I called for the creation of a new WPA almost exactly 3 years ago, and we've both called for massive spending programs funded by long term bonds (currently priced at 2% yields) to bring the US's failing infrastructure into the 21st century. Imagine where we'd be now if that had happened. Sigh. Oh, well.
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2 comments:
"In passing, despite the Pied Piper of Doom's vile description of Bonddad as an apologist for the "status quo," the fact is Bonddad and I called for the creation of a new WPA almost exactly 3 years ago, and we've both called for massive spending programs funded by long term bonds (currently priced at 2% yields) to bring the US's failing infrastructure into the 21st century. Imagine where we'd be now if that had happened. "
The early 2003 to mid-2008 boom bust cycle resulted from malinvestment and lack of investment in domestic production. Krugman and Bonddad believe we need more malinvestment to "fix" our economy? My question is why Bonddad believes that building some infrastructure will accomplish any more than it did back in the 03-08 timeframe, where it appeared to bring a boom for several years but then resulted in a complete collapse?
The main reasons GDP has gone up this much - or even close to this much - over both Q1 and Q4 2011 is because inflation has been grossly underestimated via the GDP deflator and there's been a large buildup of durable goods inventories. The buildup of inventories is especially troubling. Much of it is in the export market, where another leg down in global economic activity ex-US will result in a long liquidation period. There has also been a huge inventory build in autos, where without a large increase in sales over the next months, there will have to be a much longer summer shutdown this year, which will drag on GDP.
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