GDP growth drops to 3.2% in first quarter of 2010

posted at 11:36 am on April 30, 2010 by Ed Morrissey

In January, Barack Obama and Democrats insisted that the 5.7% annual growth rate in the fourth quarter of 2009 showed that their stimulus plan had set the American economy back on track for rapid growth and job creation.  The administration needed a big number for 2010 to allay fears that unemployment would stagnate at the current high levels for the long term. Unfortunately, they didn’t get it, with the 3.2% annualized GDP rate for the first quarter of 2010 falling below analyst expectations:

The U.S. economy grew at a 3.2 percent annual rate in the first three months of the year, evidence that the economic recovery continues to plug along but that growth is not accelerating in a way that would bring down joblessness rapidly.

The first-quarter gain in gross domestic product represents a deceleration from the 5.6 percent pace of growth in the final months of 2009, and is a bit below the 3.5 percent growth analysts were forecasting.

Neil Irwin at the Post manages to avoid using the word “unexpectedly” as part of his report. Maybe the Associated Press will employ its favorite adverb?

The news was not all bad. Unlike the last measure, this GDP result didn’t come from substantial inventory adjustments, but from actual consumer activity. Americans increased their consumption by 3.6% in the first quarter, which may indicate that families have adjusted to employment levels at the moment. Businesses invested in their equipment, increasing their spending by over 13% on an annualized basis.

The good news, however, doesn’t outweigh the bad. The last time the US suffered this kind of recession and unemployment, in 1982, it took several quarters of annualized growth of between 7%-9% in order to generate sufficient numbers of jobs to seriously lower unemployment. The long-term trend of the American economy is growth between 2.5-3%, which makes the 2010Q1 result barely a blip above average. It indicates that the current job situation may well become the “new normal,” with high unemployment remaining in place for years to come.

We will not see the kind of growth necessary to put people back to work until the government stops sending pricing signals of higher taxes and more burdensome regulation regimes. Capital will not flow back into the market under the conditions set by the Obama administration and the Democratic Congress over the last fifteen months. Instead, it will most likely flow overseas, in markets more friendly to capital investment, where the nation’s executive doesn’t offer off-the-cuff remarks about people making too much money.


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Comment pages: 1 2

Would you be overly negative like Ed is being here?

blink on April 30, 2010 at 2:39 PM

I think Ed is pretty spot on with his assessment. You on the other hand, are holding to an absurd standard that any growth is good news.

PackerBronco on April 30, 2010 at 2:57 PM

Instead, it will most likely flow overseas, in markets more friendly to capital investment, where the nation’s executive doesn’t offer off-the-cuff remarks about people making too much money.

Unfortunately, the circles the nation’s executive runs in these days precisely mirrors and feeds his impression that people are making too much money. As throughout his entire “mature” political career, Obama’s exposure has been limited to either the very poor, i.e. inner city Chicago, or the extremely wealthy, i.e. Chicago and Washington, D.C., insider realms.

Which leaves us here on Main Street and the Flyover Country hanging out to dry as we tighten our belts to fund even more of the excessive federal programs he mistakenly believes will solve the problems that he so desperately misunderstands.

KendraWilder on April 30, 2010 at 2:59 PM

And remember, until the GDP grows at a rate greater than 4 percent or so, the unemployment percentage won’t drop.

Fred 2 on April 30, 2010 at 2:38 PM

The other part of the equation is the growth of the government and especially the growth of entitlement spending. Many of the projections regarding the size of the future deficit make assumptions regarding future GDP. If the numbers come in below that rate, even if positive, it is NOT good news.

Blink seems to not understand this or is being willfully obtuse. In essence he is arguing that as long as you continue to make money (positive growth) that’s good while ignoring the fact that you have to make enough money to cover expenses and accomodate increases in the population.

PackerBronco on April 30, 2010 at 3:01 PM

If you think that the signals this administration is sending …
Midas on April 30, 2010 at 12:21 PM

Obama has been pretty consistent in sending two signals:

1) If you’re needy, the government will take care of you.
2) If you’re prosperous not needy, you going to be taxed, until you are.

Based on that, the outcome is not too hard to predict.

PackerBronco on April 30, 2010 at 2:33 PM

Fixed it.

Slowburn on April 30, 2010 at 3:03 PM

There’s a difference between recovered and recovering.

blink on April 30, 2010 at 2:36 PM

As well as the difference between “recovering” and “falling behind at a slower rate”.

PackerBronco on April 30, 2010 at 3:03 PM

blink on April 30, 2010 at 12:10 PM
blink on April 30, 2010 at 12:13 PM
blink on April 30, 2010 at 12:15 PM
blink on April 30, 2010 at 12:16 PM
blink on April 30, 2010 at 12:17 PM
blink on April 30, 2010 at 12:25 PM
blink on April 30, 2010 at 12:27 PM
blink on April 30, 2010 at 12:31 PM
blink on April 30, 2010 at 12:35 PM
blink on April 30, 2010 at 12:46 PM
blink on April 30, 2010 at 12:48 PM
blink on April 30, 2010 at 12:49 PM
blink on April 30, 2010 at 12:53 PM
blink on April 30, 2010 at 12:56 PM
blink on April 30, 2010 at 1:01 PM
blink on April 30, 2010 at 1:19 PM
blink on April 30, 2010 at 1:43 PM
blink on April 30, 2010 at 2:19 PM
blink on April 30, 2010 at 2:36 PM
blink on April 30, 2010 at 2:39 PM
blink on April 30, 2010 at 2:41 PM
blink on April 30, 2010 at 2:49 PM
blink on April 30, 2010 at 2:50 PM

I’m sorry, could you please repeat that?

logis on April 30, 2010 at 3:04 PM

Slowburn on April 30, 2010 at 3:03 PM

“applause”

PackerBronco on April 30, 2010 at 3:04 PM

Blink seems to not understand this or is being willfully obtuse. In essence he is arguing that as long as you continue to make money (positive growth) that’s good while ignoring the fact that you have to make enough money to cover expenses and accomodate increases in the population.
PackerBronco on April 30, 2010 at 3:01 PM

Yeah. I’m sure that’s it. The raging psychopath must have missed a tiny little detail somewhere along the line.

logis on April 30, 2010 at 3:08 PM

FDR worked very hard to lower expectations and to establish a “new normal” to mask the continued sluggishness of the economy and the failure of his New Deal policies. Same song, different verse.

So how long before this number is revised down? Next Friday evening? Maybe Friday night two weeks from now?

stvnscott on April 30, 2010 at 3:13 PM

blink on April 30, 2010 at 12:10 PM
blink on April 30, 2010 at 12:13 PM
blink on April 30, 2010 at 12:15 PM
blink on April 30, 2010 at 12:16 PM
blink on April 30, 2010 at 12:17 PM
blink on April 30, 2010 at 12:25 PM
blink on April 30, 2010 at 12:27 PM
blink on April 30, 2010 at 12:31 PM
blink on April 30, 2010 at 12:35 PM
blink on April 30, 2010 at 12:46 PM
blink on April 30, 2010 at 12:48 PM
blink on April 30, 2010 at 12:49 PM
blink on April 30, 2010 at 12:53 PM
blink on April 30, 2010 at 12:56 PM
blink on April 30, 2010 at 1:01 PM
blink on April 30, 2010 at 1:19 PM
blink on April 30, 2010 at 1:43 PM
blink on April 30, 2010 at 2:19 PM
blink on April 30, 2010 at 2:36 PM
blink on April 30, 2010 at 2:39 PM
blink on April 30, 2010 at 2:41 PM
blink on April 30, 2010 at 2:49 PM
blink on April 30, 2010 at 2:50 PM
blink on April 30, 2010 at 3:14 PM
blink on April 30, 2010 at 3:15 PM
blink on April 30, 2010 at 3:16 PM

Here’s something I’ll repeat:
blink on April 30, 2010 at 3:18 P

Huh?

No, dumbass. I meant you need to type the same thing over and over and over again, but a whole lot LOUDER each time.

Otherwise everybody is going to think you’re some kind of freak.

logis on April 30, 2010 at 4:23 PM

1st quarter INCREASE IN CONSUMER SPENDING?

TWO WORDS:

TAX REFUNDS!!!!!

PappyD61 on April 30, 2010 at 1:48 PM

–That would assume people generally filed their tax returns by March 5 or so, instead of waiting to file in April.

Jimbo3 on April 30, 2010 at 4:25 PM

I was right. You aren’t smart enough to understand my point.

blink on April 30, 2010 at 3:15 PM

Everyone got your point. It was that 3.2% > 0%. It was our mistake in thinking you had something more insightful to say than that. We were wrong.

PackerBronco on April 30, 2010 at 4:31 PM

Bush Sr. presided over 6 consecutive quarters of increasing GDP before losing to the slogan “it’s the economy, stupid.” No one in the media would call it a recovery because the rule is that you can’t call it a recovery until the GDP passes the old high from before the recession starts. The recession could “double-dip” and it’s all one recession unless the GDP passes the old high. In April of Clinton’s first year we finally learned we were in the third year of a recovery and Clinton looked like a miracle worker.

Somehow, the rule doesn’t apply now. The media is already using the word, “recovery.”

That’s beyond mere bias; that’s partisan deception. The definitions of “recession” and “recovery” are in the econ textbooks.

Pythagoras on May 1, 2010 at 2:11 AM

Comment pages: 1 2