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.
Blowback
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Time to spend another $1,000,000,000,000.00?
Inanemergencydial on April 30, 2010 at 11:45 AM
Wow, sure didn’t see *this* coming.
/sarc
Midas on April 30, 2010 at 11:46 AM
Kick butt! We’ll all be Hoping for Change soon!
Hey buddy, can ya spare some Change?
Battlecruiser-operational on April 30, 2010 at 11:46 AM
This is what happens when you have a President, who made $5,000,000 last year, decides that everybody else has made enough money.
AUINSC on April 30, 2010 at 11:48 AM
You’re assuming that the inevitable income tax hikes(and God help us, possibly a VAT) won’t stifle economic growth even more.
Doughboy on April 30, 2010 at 11:49 AM
Going right along as planned.
With Greece, Spain, Portugal and Ireland going bust and with no more oil drilling in the Gulf we’re going to get a nice little spike in inflation in the next month or so.
Going right along as planned.
BowHuntingTexas on April 30, 2010 at 11:50 AM
You got to it first but anyway . . . “Hey maybe we’ve all made enough money!”
rebuzz on April 30, 2010 at 11:51 AM
“Unexpected”
Daggett on April 30, 2010 at 11:51 AM
Yeah, assuming Obowma and his Merry Band of Marxists actually want to improve the economy, not destroy it and remake it into their Commie wet dream.
Cloward Piven, baby.
Battlecruiser-operational on April 30, 2010 at 11:52 AM
So when this gets revised down as these numbers always seem to, then it will be a sign of the recovery ‘ plugging along’?
catmman on April 30, 2010 at 11:54 AM
Couple this news with the fed announcement, and there’s actually more good economic news coming out of the last 2 days than bad. You’re cherry-picking, Ed.
ernesto on April 30, 2010 at 12:00 PM
No recovery where I\’m at. We just had a 10% across the board layoff yesterday. We lost one senior engineer and if things don\’t pick up this quarter I may be next. Green shoots baby! Not!
RobD on April 30, 2010 at 12:00 PM
Headline: GDP Plunges 56%!
faraway on April 30, 2010 at 12:01 PM
Exactly. The only other alternative is that the administration is just SO stupid that it can’t fathom why doing nothing to improve the economy and everything to hurt it isn’t having a beneficial effect.
That’s going to be tough to achieve by an administration that hates the private sector.
Daggett on April 30, 2010 at 12:01 PM
I thought Joe Biden predicted like 7%+ growth for several years going forward…..
what up?
ted c on April 30, 2010 at 12:02 PM
Drawing on your vast knowledge of all things economic please explain to us ignorant proles why a significant drop in the GDP is good news….coupled with anything.
Oldnuke on April 30, 2010 at 12:07 PM
Hey, it’s only been like 15 months…these things take time and deficit spending…lots and lots and lots of time and deficit spending.
AUINSC on April 30, 2010 at 12:09 PM
Ed, Obama’s policies are terrible, and he wants to do more terrible things.
But you are stupid to make such definitive claims.
blink on April 30, 2010 at 12:10 PM
9.7% unemployment, the GDP fell further than analysts expected, there’s unlikely to be any real job growth this year, and the S&P has made debt rating downgrades its new hobby.
Could you stop making the situation look bad, Ed?
amerpundit on April 30, 2010 at 12:10 PM
But…the stock market is suuurging…recovery is on the way. Just around the bend. Right after the VAT, Cap & Tax and Obamacare kicks in. Hope n Change.
Fletch54 on April 30, 2010 at 12:11 PM
Heh, if a Republican were President, the MSM headlines would indeed read “GDP growth rate plunges 44% in Q-1!”
forest on April 30, 2010 at 12:12 PM
No the actual headline is this.
Oldnuke on April 30, 2010 at 12:12 PM
There wasn’t a significant drop in the GDP!
There was a significant drop in GDP growth! Learn the difference.
Think before you couple your comments with sarcastically calling yourself ignorant – otherwise it doesn’t seem sarcastic.
blink on April 30, 2010 at 12:13 PM
“Growth is not accellerating?”
George Orwell was wrong. Modern propagandists make his Doublespeak sound downright straightforward.
logis on April 30, 2010 at 12:14 PM
Which isn’t also good. Quoth WaPo:
amerpundit on April 30, 2010 at 12:15 PM
On the contrary; his statement is quite accurate.
Midas on April 30, 2010 at 12:15 PM
The GDP didn’t fall at all. The GDP rose in 1Q.
Bold statement, and I think you’re wrong.
blink on April 30, 2010 at 12:15 PM
Unexpected!
By the way, I absolutely LOVE this new format.
Great work guys!
carbon_footprint on April 30, 2010 at 12:15 PM
He predicted something. How do you know it’s accurate now?
You can agree with his prediction, but you can’t definitively claim it’s accurate.
blink on April 30, 2010 at 12:16 PM
UGH! The new lay out of Hot Air is fugly. The old lay out was sharp, clean, and original. Now this site looks like every other cluttered junky blog out there.
dKap on April 30, 2010 at 12:16 PM
Because in lefties’ minds, the ‘right kind’ of people (old whities) are suffering more.
Sir Napsalot on April 30, 2010 at 12:17 PM
You’re absolutely correct, I stand corrected.
Oldnuke on April 30, 2010 at 12:17 PM
Maybe not, but write accurate comments – not inaccurate ones.
blink on April 30, 2010 at 12:17 PM
Bold? The White House itself isn’t projecting any significant job growth in 2010.
Projections of 95,000 jobs a month, hovering around in 9% for the rest of the year.
And April 4th, again:
Christina Romer:
I’m not bold.
amerpundit on April 30, 2010 at 12:20 PM
which may indicate that families have
adjusted to employment levels at the momentRECEIVED THEIR EITC FROM THE CHINESE.mankai on April 30, 2010 at 12:20 PM
How do I know it’s accurate?
I live in the business world. I word and consult daily with business owners, who virtually all not only would agree with that assessment, but act it out in their business decision-making every day.
Should I hire?
Should I expand?
Should I buy new equipment?
Should I invest in R&D and roll out new product?
If you think that the signals this administration is sending to the market via new regulation and costs in terms of healthcare, cap & trade, additional layers of taxation, increased energy costs, punishing the private sector and more are *NOT* being considered quite seriously as a negative influence on these decisions, then *you* have some serious critical thinking issues.
Midas on April 30, 2010 at 12:21 PM
LOL +1000
Midas on April 30, 2010 at 12:22 PM
He can be close enough to actually be watching the prediction come true.
amerpundit on April 30, 2010 at 12:22 PM
…and don’t let it happen again.
BigWyo on April 30, 2010 at 12:24 PM
2.0% annual GDP growth is what has traditionally been considered necessary to maintain employment levels (due to traditional productivity gains).
This level of GDP growth is adequate to create jobs – slowly at first, but picking up steam as more and more businesses/consumers are comfortable with the recovery.
Don’t get me wrong. The dominoes are still set up to fall (too much government debt, fannie/freddy balance sheet problems, etc.), but it’s quite possible we delay the disaster and actually grow the economy and employment in the meantime.
blink on April 30, 2010 at 12:25 PM
How the Illinois “blueprint” for the U.S. “stimulus” is ending, courtesy of the Chicago Tribune: “One of former Gov. Rod Blagojevich’s former chiefs of staff who is expected to be a key witness in his corruption trial entered a new guilty plea in federal court this morning.
Alonzo “Lon” Monk, 51, originally pleaded guilty in October and agreed to testify. Today, he pleaded guilty to a superceding indictment that was filed in the case in February.
The new indictment was designed to head off any issues if the Supreme Court strikes down or limits the “honest services” fraud law. Monk’s plea was necessary before Blagojevich’s trial, set for June 3.
Monk is expected to testify that Blagojevich and three of his closest friends – including Monk – schemed from the outset of his administration to enrich themselves by leveraging the powers of Blagojevich’s office.
Monk is expected to tell the jury how the four — a group that also included key fundraisers Christopher Kelly (dead/aspirin) and Antoin “Tony” Rezko (convicted/no sentence) planned to bring in hundreds of thousands of dollars in campaign contributions they could split up when Blagojevich left office.
Monk’s origninal plea was to a single count of mail fraud in exchange for two years in prison. Prosecutors dropped that count Friday and had Monk plead to one count of conspiracy to solicit a bribe.
That charge relates to Monk’s role in an alleged Blagojevich scheme to bring in a campaign contribution from a horseracing executive in exchange for Blagojevich signing a bill designed to aid the horseracing industry in the state.”
This is how this administration operates. You don’t pay, you don’t play. No wonder Hot Rod wants Obama to testify. Some stimulus.
MayorDaley on April 30, 2010 at 12:27 PM
Did you rely on stupid government projections prior to the recession which indicated bold GDP growth and job creation?
It’s also good to see that the White House trick of lowering expectations fooled you.
blink on April 30, 2010 at 12:27 PM
Look Who’s Cherry-Picking?
PappaMac on April 30, 2010 at 12:30 PM
This administration is sending negative signals.
But growth and job creation can occur despite these negative signals.
Economies are mostly cyclical. The up-cycles can definitely be damped by negative signals by a President, but that doesn’t mean that the up-cycle won’t necessarily happen.
Again, Ed’s prediction is stupid to make, and I think he’s wrong.
Please. Many of us live in the business world.
blink on April 30, 2010 at 12:31 PM
http://market-ticker.org/archives/2254-First-Quarter-2010-GDP-Advance.html
the_nile on April 30, 2010 at 12:32 PM
I don’t rely solely on White House projections, just like I don’t rely on candidates downplaying their debate talent before a debate.
It’s that the White House is conceding what others, from both sides of the aisle, expect: Little job growth. In fact, that’s what the Federal Reserve is expecting as well.
amerpundit on April 30, 2010 at 12:32 PM
This wasn’t a drop in GDP at all. It’s a drop in the GDP growth rate. 2ndly, the federal reserve has determined that inflationary pressures are still quite low, and will keep interest rates low for an extended period of time. Consumer spending is up, and commercial investment is set to ramp up as well. Also, spending by state and local governments fell 4%.
Now, compare that to a country like Britain, who mustered an anemic .27% increase in GDP, and you begin to see why this latest round of economic news is far from all bad for the US.
ernesto on April 30, 2010 at 12:32 PM
They’re cyclical , if you leave them alone , but the decade of the depression shows what happens when the government interfere deeply.
the_nile on April 30, 2010 at 12:33 PM
Do you expect real any real job growth in 2010, blink? I don’t a point or two, but something that really gets us on our way to job recovery?
amerpundit on April 30, 2010 at 12:33 PM
Really? Like players in major league baseball being close enough to actually watch the World Series predicted winner come true in April?
Please.
blink on April 30, 2010 at 12:35 PM
Who calculated this number? GE or our Government. Neither we can trust!
The GDP has always seen a surge after Tax Season furthermore, 3.2% up from what? 0 (ZERO)?
BigMike252 on April 30, 2010 at 12:35 PM
That is actually a very good point, and one I think we should make note of. As the old saying goes, the only three things that matter in establising a propganda meme are: repetition, repetition and repetition.
What liberals are working very hard to establish here is new status quo. And anyone who tries to question it must be attacked over and over and over again.
logis on April 30, 2010 at 12:37 PM
No. The tend to be cyclical even if you don’t leave them alone. The question is whether or not Obama’s stupid policies (and the fear of more stupid policies) is enough to prevent the cycle.
I don’t think the up-cycle will be prevented, but I think it will be lackluster compared to what it could be if we had good government policies.
The problem is that even 4% GDP growth and unemployment falling to 8% or 9% will be used by Obama to claim that his policies are good since conservatives like Ed were wrong to predict doom and gloom.
blink on April 30, 2010 at 12:40 PM
Not quite the same thing, now is it?
amerpundit on April 30, 2010 at 12:41 PM
You’re a day late and a dollar short in pointing that out. Blink’s already brought that to my attention, and rightly so. I stated it inaccurately, but I’m sure you understood what I meant. The change in the growth rate of the GDP from the fourth quarter of 09 to it’s present rate cannot be seen in a positive light no matter what you couple it with. It may not be a sure sign of economic disaster but it certainly is not good news.
Oldnuke on April 30, 2010 at 12:42 PM
Perhaps. And yet most aren’t as patently silly and in denial as you seem to be.
Midas on April 30, 2010 at 12:44 PM
I wouldn’t consider it all that telling one way or the other. The rate in Q4 09 was to a degree artificial. To assume that the actual drop in output mirrors the GDP figures is to ignore things like stimulus spending and census hires.
ernesto on April 30, 2010 at 12:45 PM
I expect a point or two. It’ not much, but the media will use it to praise Obama. The more economic praise being touted, the higher consumer/business confidence will grow.
People like Ed are falling to right into the trap. His stupid predictions can be thrown right back at him as if he doesn’t know anything about government economic policy. That damages the credibility of conservative economic policies.
blink on April 30, 2010 at 12:46 PM
It’s not the exact same thing, but you get my point.
blink on April 30, 2010 at 12:48 PM
Btw, being in a position to observe a prediction coming true is much different than definitively knowing that a prediction will come true.
blink on April 30, 2010 at 12:49 PM
–It’s a whole lot better than having a negative GNP growth rate, which was the case during most of 2008 and Q1 of 2009.
Jimbo3 on April 30, 2010 at 12:52 PM
I disagree entirely. I don’t think it’s bad that GDP grew at a rate of 3.2% at all. I wish it grew more, but a consistent 3.2% will create jobs steadily. It’s certainly better than the doom and gloom predicted by many conservatives.
What’s wrong with 3.2%?
blink on April 30, 2010 at 12:53 PM
–If we can get to an 8% national unemployment rate by even the middle of 2012, it will be a pretty spectacular achievement. Let’s first hope that happens and then argue about who is responsible for that.
Jimbo3 on April 30, 2010 at 12:54 PM
You think I’m in denial for thinking that GDP could grow at 4% this year and that unemployment could drop to as low as 8% or 9%?
What is so silly about that expectation? GDP would still be down from its highs and 8% to 9% unemployment is still terrible.
blink on April 30, 2010 at 12:56 PM
Given that the ObaMao regime is trying to inflict all the same burdens on our economy as the Brit’s already have, I’m surprised we have growth at all.
Slowburn on April 30, 2010 at 12:58 PM
No, it wouldn’t. Economies are mostly cyclical. It’s no achievement.
Of course I hope that happens, but it would be pathetic if we still had 8% unemployment by mid-2012. Conservative economic policies would have allowed much more job creation than that.
I have no doubt who the media will grant credit, but the real question is whether or not job creation would have been more robust without Obama’s stupid policies and the fear he has instilled in many businesses.
blink on April 30, 2010 at 1:01 PM
What are the odds that the 3.2 GDP will ‘unexpectedly’ (and quietly in the PRESSSidential media) drop to under 3% in a couple weeks?
drfredc on April 30, 2010 at 1:08 PM
Newsflash: we don’t.
Aside from firearms and the federal government, can someone name ONE industry that’s actually growing right now?
logis on April 30, 2010 at 1:09 PM
I didn’t say that growing was a bad thing. I said that the decrease in the growth rate is not a good thing and can’t be seen in a positive light. Growth is always good, but the decrease is not a positive sign. I also doubt that 3.2% growth will create jobs to any significant degree.
Oldnuke on April 30, 2010 at 1:10 PM
But NPR says 3.2% is a “sure sign” recovery has started. NPR wouldn’t tell an outright lie just to make Obama look better, would they?
I also have some questions about the Pope’s religious affiliation when you have time.
drunyan8315 on April 30, 2010 at 1:13 PM
So if your business grew at 5% one quarter and 3% the next quarter, then there would be no way for you to see that in a positive light? Your business is still growing – how’s that for a positive light?
Really? How is that possible? Do you think we’ll have steady productivity gains greater than 3.2%?
blink on April 30, 2010 at 1:19 PM
“You’ve made enough money.”
Noel on April 30, 2010 at 1:21 PM
Really broke out the thesaurus in that paragraph.
Onus on April 30, 2010 at 1:23 PM
Bloomberg also ran with that phrase. Are they considered liberal MSM?
ernesto on April 30, 2010 at 1:24 PM
Hey, not all bad news. At least our GDP is still growing…
Dark-Star on April 30, 2010 at 1:25 PM
Blame Bush.
No last year at this time, they had shut down the car plants. This year they are building cars. We are still short of the economy size that we had under Bush.
seven on April 30, 2010 at 1:28 PM
The Oconomy!
Better demonize some Arizonans fast!
profitsbeard on April 30, 2010 at 1:32 PM
I can see November from my house
Then we can have some change we can believe in.
The second quarter last year was also very low because all the car plants were shut down. It will be easy to see an increase over that period.
Two hot careers today Repo man and economist news spinner. Spinning bad economic news is a tough job.
seven on April 30, 2010 at 1:32 PM
It’s not terrible news, but it’s far from the complete picture. The issue is, is the typical household’s financial situation as fragile as it was a year ago? Is nearly all that bad paper out there still bad? Is the commercial RE market still a strong breeze away from falling over?
Yes, yes, and yes.
DrSteve on April 30, 2010 at 1:33 PM
You are in denial if you think there’s any chance in hell that unemployment will get down to 8% this year.
xblade on April 30, 2010 at 1:37 PM
How about 9% by the end of the year? Or 8.5%?
blink on April 30, 2010 at 1:43 PM
1st quarter INCREASE IN CONSUMER SPENDING?
TWO WORDS:
TAX REFUNDS!!!!!
PappyD61 on April 30, 2010 at 1:48 PM
That would be terrific, obviously.
But not nearly as good as if unemployment goes up to 12% first. ‘Cause then it would “improve” by an even bigger margin.
logis on April 30, 2010 at 1:51 PM
Sorry to bust your little bubble there. But, unfortunately it’s government spending that’s propping up the “demand.”
And the only way this type of “consumer spending” can continue to increase is if even more tax money is taken out of the economy.
logis on April 30, 2010 at 1:57 PM
Do those expectations suggest denial? Or is denial only suggested by 8%?
blink on April 30, 2010 at 2:19 PM
“… I do think at a certain point your GDP is high enough …”
- Barack Obama
PackerBronco on April 30, 2010 at 2:20 PM
If the unknowing listened to Obama today they would have thought we were recovered. He is trying to sell this as a pure win for the stimulus.
In his defense though he does see a 45% approval rating as good, maybe he just doesn’t know how numbers work (which would make sense seeing every bill he’s pushed”
Rbastid on April 30, 2010 at 2:22 PM
Well, think of this way. If you get a 3% raise but you were hoping for 5 or 6% because you just had another baby and you have to take care of any aging mother who needs nursing home support, well you would probably not be all pollyannish about the smaller-than-expected raise.
We have a growing country with expanding needs for entitlements and so forth and thus a lower-than-expected GDP is not always cause for celebration even if it is a positive value.
PackerBronco on April 30, 2010 at 2:26 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, you going to be taxed.
Based on that, the outcome is not too hard to predict.
PackerBronco on April 30, 2010 at 2:33 PM
Think about it: Unlike 1982 there are no major sectors of the economy poised for strong growth such that significant numbers of good, long term jobs will be created. Ask yourself, what industry or industries are poised to go gangbusters such that they can pull the rest of the economy out of the pit along with them.
Technology, automobiles, construction (residential/commercial), aerospace, farming, energy, finance are all moribund for a host of reasons – some more so than others – and show no promise of being the engine of job creation that pulls us out of the doldrums.
What about “Green Jobs” you say? I’m the founder of an alternative energy start up and been involved in the energy industry for decades. I truly wish it were different, but green is far less capable than the other sectors (if we view green as a sector for discussion purposes) because it requires such intense government subsidy/regulation for such little economic contribution and by trying to pick winners and losers, the government props up vendors/technologies that in reality should die off freeing up money and resources for those that should continue – that is what the market does best and government does worst.
Under the current government subsidy-regulation driven paradigm, “Green” takes more away from the economy than it provides.
DrDeano on April 30, 2010 at 2:33 PM
There’s a difference between recovered and recovering.
blink on April 30, 2010 at 2:36 PM
And remember, until the GDP grows at a rate greater than 4 percent or so, the unemployment percentage won’t drop. That’s because there are more people entering the job market than leaving. So unless things accelerate quickly, we won’t be seeing unemployments rates that start with the digit “8″ by Nov. And if that doesn’t happen how will the New York Times and its friends be able to declare Obama the greatest economic genius since Midas in time to help?
Fred 2 on April 30, 2010 at 2:38 PM
Why would you only hope for 5 or 6%? Why not hope for 15% or 150%?
Would you be overly negative like Ed is being here?
blink on April 30, 2010 at 2:39 PM
2% is a more realistic number than 4%.
blink on April 30, 2010 at 2:41 PM
That’s the new status quo: anything above zero is now cause for celebration.
As Obama says: “You should be thanking me!”
logis on April 30, 2010 at 2:42 PM
That’s not true. But don’t deny growth that’s occurring and likely to occur into the near future.
blink on April 30, 2010 at 2:49 PM
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