The economy expanded by 1.5% in the second quarter, down from 2% in the first quarter and another sign of the downshift we've previously seen in the job market. Consumer spending, still 70% of GDP, slowed in the second quarter to its slowest pace in a year, led by a 1% decline in spending on durable goods (big ticket items that last for a few years, like cars and refrigerators). The public sector also continued to contract, subtracting 0.3% from growth in the second quarter.
The usual suspects are contagion from Europe, worries about the fiscal cliff, the ongoing deleveraging cycle where households are still too wrapped up in smoothing out their balance sheets to do much consuming (the savings rate climbed in the 2nd quarter), and that in turn sends negative signals to investors. Pushing the other way are lower gas prices and a housing market that seems to have finally carved out a bottom (investment in homes has contributed to growth for over a year now).
Sure... but at this point, I'm less convinced by this list of suspects. I think we're stuck in a negative cycle where weak employment suppresses incomes which suppresses consumption, investment, and growth, feeding back into weak hiring. It's a cycle that's clearly self-perpetuating, and the best way out would be, as Paul Krugman points out this morning, to take advantage of the low borrowing costs available to the government and put some people back to work through state fiscal relief (fiscal contraction has lowered real GDP growth in 9 of the last 10 quarters), repairing the public schools, and other necessary infrastructure repairs (read this and tell me if you disagree!).
More to come on the GDP report... there are revisions to earlier years here that look interesting ('09 was less negative than we thought, '10 was less positive).
This post originally appeared at Jared Bernstein's On The Economy blog.
Follow Jared Bernstein on Twitter: www.twitter.com/@econjared
where are the jobs obama?
no jobs = no obama
We have heard for years that the infrastructure, most paid for by tax dollars and therefore our government, is in great disrepair. Nothing much has been done to repair or replace it.
We spend unlimited dollars rebuilding and repairing the destruction we create during the wars we wage...politicians are eager to spend and spend and spend on these "projects"...but none of them seem at all concerned about our own country....
http://www.mittromney.com/issues/trade
Trade
"...Every president beginning with Ronald Reagan has recognized the power of open markets and pursued them on behalf of the United States. George W. Bush successfully negotiated eleven FTAs, encompassing sixteen countries. He also had the vision to commence negotiations with a number of allies around the Pacific Rim to expand significantly the Trans-Pacific Partnership. All told, these agreements have enabled people across the world to come together and build a better future. Economists estimate that the agreements have led to the creation of 5.4 million new American jobs and support a total of nearly 18 million jobs. Looking beyond just our FTA partners, our total exports support nearly 10 million American jobs. These are not just jobs; they’re good jobs, paying significantly above average, and more than one-third are in manufacturing.
o Reinstate the president’s Trade Promotion Authority
o Complete negotiations for the Trans-Pacific Partnership
o Pursue new trade agreements with nations committed to free enterprise and open markets
o Create the Reagan Economic Zone..."
Have any of the "free" trade agreements created jobs in the U.S., other than minimum-wage jobs?
The elites of the U.S. have more in common with other nations' elites that with the U.S. working class.
That will eliminate currency manipulation, and global labor arbitrage.
http://www.huffingtonpost.com/robert-reich/romney-middle-class_b_1257859.html
Robert Reich: The Downward Mobility of the American Middle Class, and Why Mitt Romney Doesn't Know
"January's increase in hiring is good news, but it masks a bigger and more disturbing story -- the continuing downward mobility of the American middle class.
Most of the new jobs being created are in the lower-wage sectors of the economy -- hospital orderlies and nursing aides, secretaries and temporary workers, retail and restaurant.
Meanwhile, millions of Americans remain working only because they've agreed to cuts in wages and benefits. Others are settling for jobs that pay less than the jobs they've lost. Entry-level manufacturing jobs are paying half what entry-level manufacturing jobs paid six years ago..."
Two-thirds of the occupations with the most growth in the 2010-2020 period are low-paying jobs:
http://www.huffingtonpost.com/jared-bernstein/bls-employment-projections_b_1284244.html
Jared Bernstein: Stop the Presses: New Employment Projections!
Only one engineering discipline mentioned in the BLS Fastest Growing Occupations out to 2020: biomedical engineer:
http://www.bls.gov/emp/ep_table_103.htm
Fastest growing occupations
http://www.bls.gov/ooh/most-new-jobs.htm
Most New Jobs : Occupational Outlook Handbook : U.S. Bureau of Labor Statistics
What does the doctor in social work who pretends to be an economist think we should do?
Hold onto your seats because this one really came out of the blue:
More Government Spending!
More Government "Stimulus"!
Who could have expected that from Jared the Bernstein? What a surprise! Shock!
If Jared keeps this up, the next thing you know he will be wanting higher taxes!
What Jared does not mention is how is it possible that after the biggest stimulus in the history of the human race and the largest deficits EVAH- three years in a row, President Obama cannot bring joblessness below 8.1%?
8.1%!!
Why even George Bush 43, terrible, awful, horrid as he was, only managed to get joblessness up as high as to 7.8%.
But after all that money spending, after buying GM for his union cronies, after flushing hundreds of billions down the green energy toilet, provided the insane projects were dreamed up by his campaign contributors, after causung a tsunami of infrastucture project funding to flood cities and states, Obama can only muster 8.1%, and that was in April 2012; now it's going back up again!
I am not saying another round of stimulus spending wouldn't work. What I am saying is another round of stimulus spending by Obama won't work.
The Seattle Times: Nation & World: Bush report: Sending jobs overseas helps U.S.
"WASHINGTON — The movement of American factory jobs and white-collar work to other countries is part of a positive transformation that will enrich the U.S. economy over time, even if it causes short-term pain and dislocation, the Bush administration said yesterday.
The embrace of foreign "outsourcing," an accelerating trend that has contributed to U.S. job losses in recent years and has become an issue in the 2004 elections, is contained in the president's annual report to Congress on the U.S. economy.
"Outsourcing is just a new way of doing international trade," said N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors, which prepared the report. "More things are tradable than were tradable in the past. And that's a good thing..."
N. Gregory Mankiw is now Mitt Romney's principal economic adviser.
Larry Summers has been Obama's principal economic advisor since the dawn of man. Here is what Larry says about that horrible outsourcing - "We should not oppose offshoring or outsourcing." http://www.theatlantic.com/politics/archive/2012/07/president-obamas-disingenuous-attack-on-outsourcing/259851/
But, what exactly does your rant about outsourcing, a favorite trend of the Obama administration, have to do with Jared the Bernstein, or more money wasted on stimulus, or Obama's inability to reduce joblessness even to the level that George Bush left it?
Be specific now.
Alux,
While I agree that the GM rescue favored the unions, the other claims in this paragraph are grossly inflated. For example, please provide objective sources that show how Obama "flushed HUNDREDS of BILLIONS of dollars down the green energy toilet". But I will agree that Obama has surely flushed $100 billion down the Afganistan War toilet, but that spending partially subsidizes the "dirty energy" source of oil through the pipeline that traverses that country.
And that's part of the problem. In our boom years of investing and producing and exporting, that figure was historically much closer to 60%. Only in our more recent decades of borrowing and consuming and importing has the number pushed (and even exceeded) 70%. That's where a ten trillion dollar cumulative trade deficit will bring you when you build an economy on excessive credit expansion and endless government spending.
Really? Can Uncle Sam lock in 3% for 30 years like I can? If he can, why is only 10% of his debt for a longer term than 10 years? Why does 70% of his debt mature in less than 5 years? When that debt rolls over at a new interest rate in a few years, how do you know it will be at 1, 2, or 3% and not at 6, 7, or 8%?
has flatlined the economy
$5.7Trillion more debt
and 21 new Obamacare taxes
mean the economy is going nowhere until we get rid of Obama and his policies
Your implication is that he took something that was booming, and turn into a "flatline".
That isn't quite how I, nor anyone else, remember it.
Ask yourself this? Since we are going back into a very deep recession no matter who is President, or who controls Washington, who do you want in office? The Traitorous Corporate/Wealthy Loving Repugs who put us here, or Democrats who care about the Middle Class?
Romney's policies, what little we know of them, are exactly what Bush did. Romney's advisors are the same neo-cons who got us into 2 unpaid for wars.
You can hate Obama, you can hate Democrats; but, the only vote you can make with any level of conscience and patriotism is Straight Democrat.
Dems have fed you a line of BS and you've bought it, hook, line, and sinker.
BO has proven to be a failure when it comes to jobs and the economy. The correct vote is for ANYONE but BO (even if it is a Rep).
There's a word that describes the state of affairs wherein government and large corporations are essentially one in the same. We don't use that word any more because it's been exhausted through overuse and misapplication.
Even worse...Ben Bernanke has taken over for Adam Smith...usurping the laws of supply/demand...and personally deciding where stock prices should be...where bond prices should be...where gold prices should be...and where home prices should be....VIA shenanigans and gimmickry. Nauseating!
It is government that is the problem, men in position of power and commanding taxpayer money will always be corrupt and sold to the highest bidder.
But not if you're a Republican. After all, they also think that cutting the IRS budget by $775 MILLION is a good idea even though those cuts would lead to $5-6 BILLION in reduced receipts/revenues!! Talk about "fuzzy math".... Cut a dollar now even though it will result in $8-9 less in revenues down the road. Brilliant....