Q1 GDP still 1.8%, weekly unemployment claims jump 10,000

posted at 9:20 am on May 26, 2011 by Ed Morrissey

Four weeks ago, the Commerce Department released its preliminary estimate of annualized growth in the first quarter of 2011, which came in at an anemic 1.8% following 2010Q4′s 3.1%.  Not too many people noticed it, as I wrote a little later after my return from Rome.  While the media fawned over the previous quarter’s respectable but hardly spectacular number, the killing of Osama bin Laden buried the economic retreat in the most recent quarter.

Maybe it will get more attention today, as Commerce confirms in its recalculation that real annualized GDP growth in Q1 was 1.8%:

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 1.8 percent in the first quarter of 2011, (that is, from the fourth quarter to the first quarter), according to the “second” estimate released by the Bureau of Economic Analysis.  In the fourth quarter, real GDP increased 3.1 percent.

The GDP estimates released today are based on more complete source data than were available for the “advance” estimate issued last month.  In the advance estimate, the increase in real GDP was also 1.8 percent (see “Revisions” on page 3).

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending.  Imports, which are a subtraction in the calculation of GDP, increased.

Most of this is the same news as in the first report.  A retreat in consumer spending contributed a good part to the decline, falling from 4.0% in Q4 to 2.2% in Q1.  Imports increased, as noted in the previous report, which indicates a falloff in domestic production. Government spending declined sharply, and the removal of artificial stimuli from the economy shows that we have not generated any real economic growth or returned to prosperity.

However, the real problem in the previous report got worse in the recalculation.  Inventory growth in the last report accounted for more than half of overall growth, which lowered real final sales of domestic product to 0.8%.  The recalculation puts inventory growth at 1.19%, which means that real final sales of domestic product actually hit 0.6%.  In 2010 Q4, it was 6.7%.

Corporate profits dropped in Q1 as well, which Reuters reported with its favorite word in economics:

Corporate profits in the U.S. unexpectedly contracted in the first quarter to record their first decline in more than two years and the economy grew at the same pedestrian pace as previously estimated, a government report showed on Thursday.

After-tax corporate profits fell at a rate of 0.9 percent, the Commerce Department said, after rising at a 3.3 percent rate in the fourth quarter. The drop in profits, the first since the fourth quarter of 2008, likely reflected a slowdown in productivity growth as businesses stepped up hiring. Economists had expected corporate profits to grow at a 2.3 percent pace.

Notice how economic news that most Americans could easily predict always seem to catch Reuters by surprise?

These numbers could explain why weekly initial jobless claims jumped into the low 400Ks suddenly this year.  This week’s report gives us six straight weeks in that range, and the numbers went up again by 10,000:

In the week ending May 21, the advance figure for seasonally adjusted initial claims was 424,000, an increase of 10,000 from the previous week’s revised figure of 414,000. The 4-week moving average was 438,500, a decrease of 1,750 from the previous week’s revised average of 440,250.

The advance seasonally adjusted insured unemployment rate was 2.9 percent for the week ending May 14, a decrease of 0.1 percentage point from the prior week’s unrevised rate of 3.0 percent.

The advance number for seasonally adjusted insured unemployment during the week ending May 14 was 3,690,000, a decrease of 46,000 from the preceding week’s revised level of 3,736,000. The 4-week moving average was 3,742,250, an increase of 7,750 from the preceding week’s revised average of 3,734,500.

With corporate profits declining and the GDP heading south, don’t expect big employment numbers in May, or perhaps for the rest of the year.


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thread music for you…

ted c on May 26, 2011 at 9:23 AM

Government spending declined sharply, and the removal of artificial stimuli from the economy shows that we have not generated any real economic growth or returned to prosperity.

Those damn Republicans. Why can’t we just spend a couple trillion more to revive the economy?

(While I’m being completely facetious, you know that’s the Democrat mindset.)

Doughboy on May 26, 2011 at 9:23 AM

Let the spin begin

cmsinaz on May 26, 2011 at 9:24 AM

Okay, you lazy ass, greedy businesses, Capt. Kickass has ordered you to create jobs-now go do it!!

Dr. Carlo Lombardi on May 26, 2011 at 9:29 AM

Notice how economic news that most Americans could easily predict always seem to catch Reuters by surprise?

There’s a difference between living it and writing about it from a distance.

They can feign surprise and try to spin it all they want. Reality for millions of Americans trumps all the drivel written about the situation and the lack of concern on the part of this administration.

BO insults our allies and sucks up to our enemies. But there’s one one’s a$$ he kicks harder than working Americans.

He’s truly a loathsome SOB.

Cody1991 on May 26, 2011 at 9:29 AM

how many quarters now have we been below Sheriff Joe’s predicted growth of 7%???

I’d like to see the difference between what Joe predicted for GDP growth and the actual quarterly results. He has been off by a factor of 4-6 IIRC.

ted c on May 26, 2011 at 9:31 AM

What is worse is that inventory build made up a large chunk of that number. Taking that out, we are looking at 1%.

Vashta.Nerada on May 26, 2011 at 9:32 AM

Excellent Ted :)

cmsinaz on May 26, 2011 at 9:33 AM

I don’t know how many legs the economic stool is supposed to have, but one of them is confidence. It’s most conspicuous element that Obama has just p*ssed away.

RBMN on May 26, 2011 at 9:33 AM

With corporate profits declining and the GDP heading south, don’t expect big employment numbers in May, or perhaps for the rest of the year.

Recipe for 2012. Mix this with high gas prices and overall inflation, a ladle of high unemployment, simmer through October and toss in a conservative Republican candidate for a tasty, tasty stew. Note: Do not skimp by substituting a moderate. That will surely sour the dish.

SKYFOX on May 26, 2011 at 9:34 AM

I just saw Ben Bernanke get in his helicopter.

Mark1971 on May 26, 2011 at 9:35 AM

*Raises glass*

To the Queen!!

SouthernGent on May 26, 2011 at 9:36 AM

On a slightly more serious note, the Fed isn’t gonna attempt QE3 if these sorts of numbers continue, are they?

Doughboy on May 26, 2011 at 9:37 AM

Just think how bad things could have been blah, blah, blah.

catmman on May 26, 2011 at 9:37 AM

What is worse is that inventory build made up a large chunk of that number. Taking that out, we are looking at 1%.

Vashta.Nerada on May 26, 2011 at 9:32 AM

And it’s going to take a while for the economy to swallow that inventory. Which means more stagnation.

rbj on May 26, 2011 at 9:38 AM

On a slightly more serious note, the Fed isn’t gonna attempt QE3 if these sorts of numbers continue, are they?

Doughboy on May 26, 2011 at 9:37 AM

Pshaw! They’d be crazy not to!

Or something.

catmman on May 26, 2011 at 9:38 AM

*Raises glass*

To the Queen!!

SouthernGent on May 26, 2011 at 9:36 AM

just don’t forget to wait for the music to stop. Remind the wife beforehand that she don’t have to sit down so quick and that, nooo, she doesn’t win a cake if she’s the first to sit down./

ted c on May 26, 2011 at 9:39 AM

If only the Republicans hadn’t stood in the way of the Stimulus package. We’d be at or below 6.7% unemployment by now.

/

mankai on May 26, 2011 at 9:39 AM

A 62% Top Tax Rate?
Democrats have said they only intend to restore the tax rates that existed during the Clinton years. In reality they’re proposing rates like those under President Carter.

http://online.wsj.com/article/SB10001424052702304066504576343611464445594.html?mod=WSJ_Opinion_LEADTop

Uuuuuugggggghhhhhh….

sicoit on May 26, 2011 at 9:40 AM

Count it!!

crr6 on rare occasion, 2009-2001

/obligatory

mankai on May 26, 2011 at 9:41 AM

crr6 on rare occasion, 2009-2001 2011

mankai on May 26, 2011 at 9:43 AM

I’ve got a call in to James Clyburn to get the real story on why all this is happening.

a capella on May 26, 2011 at 9:45 AM

Unimportant news. We saved Medicare yesterday by electing a bubblehead that will do thing.

Back to your regularly scheduled reality TV show.

MNHawk on May 26, 2011 at 9:48 AM

do nothing…edit button needed

MNHawk on May 26, 2011 at 9:48 AM

Unexpected.

MassVictim on May 26, 2011 at 9:49 AM

Yep, we’re still in 2008

/Obama wrote that ya know.

Key West Reader on May 26, 2011 at 9:51 AM

One thing that is a plus when you are in a recession while democrats are in office is that amidst all the terrible news about unemployment, laid off workers there is always positive media insights about how good things really are. For instance an article about high gas prices will include the bright observation that so few people are working not many people are affected by the high price. Reagan always had tons written about the homeless, less fortunate folks. GWB if you remember was sailing along with about 5% unemployment and much was written about how terrible the economy was. So cheer up folks—Happy Days Are Here Again!

Herb on May 26, 2011 at 9:51 AM

Uuuuuugggggghhhhhh….

sicoit on May 26, 2011 at 9:40 AM

This is what drives me nutz about the Democrats’ talk of raising taxes on “the rich” and what frustrates me even more about the way the GOP just rolls over and doesn’t bother explaining this to the masses. The Dems are very good at just focusing on the federal income tax rate as if that’s the only thing people pay. But anyone who earns a paycheck(a shrinking group of Americans, BTW) knows damn well that way more than just federal income taxes are deducted. And when you couple those deductions with every other tax we pay at the state and local level(not to mention on every bill you get in the mail), we’re approaching a point where we can’t afford to pay anymore taxes.

Doughboy on May 26, 2011 at 9:52 AM

“Focused like a laser on job creation” Atta boy, Obama!

search4truth on May 26, 2011 at 9:53 AM

We have tried spending money. We are spending more than we have ever spent before and it does not work.”

Now if this administration would have studied history, we could have saved 2 1/2 years and a trillion dollars.

WashJeff on May 26, 2011 at 9:53 AM

+1 a capella

cmsinaz on May 26, 2011 at 9:58 AM

+ its time to recalculate our debt basis lower actual and projected growth…….

tomg51 on May 26, 2011 at 10:00 AM

“God Save the Queen”

(heck of a job, Barry. Heck of a job.)

stenwin77 on May 26, 2011 at 10:01 AM

Bloomberg thought the news was “unexpected” as well.

EA_MAN on May 26, 2011 at 10:03 AM

Well, he has a year and a half to completely ruin our nation’s economy. I think he could do it.

stenwin77 on May 26, 2011 at 10:06 AM

*Raises glass*

To the Queen!!

SouthernGent on May 26, 2011 at 9:36 AM

Well that was short.
Why not give thanks to the winged ones…and the ones slithering beneath the ground.
There will be a nice soothing music in the background while you do this.
It will be awesome.

Electrongod on May 26, 2011 at 10:08 AM

Next, the news organizations will have to move the number for growth up again. Seems it has already crept up from 300,000 1-1/2 years ago nearly 400,000 recently.

tomg51 on May 26, 2011 at 10:08 AM

Recovery Summer 2.0

booter on May 26, 2011 at 10:16 AM

The slowdown in the first quarter (and second) is consistent with sharply rising oil and gasoline prices from January into the beginning of May 2011. Another factor weighing down the economy right now is the rapid growth of the national debt since 2008 – we estimate it’s currently stealing about 1% from U.S. GDP.

ironman on May 26, 2011 at 10:26 AM

Hey, check it out…speculators busted for manipulation of the oil market in the 2008 run-up:

http://hosted.ap.org/dynamic/stories/U/US_OIL_MARKET_MANIPULATION?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-05-24-21-30-39

Whither thou, speculator defenders?

crushliberalism on May 26, 2011 at 11:06 AM

Next, the news organizations will have to move the number for growth up again. Seems it has already crept up from 300,000 1-1/2 years ago nearly 400,000 recently.

tomg51 on May 26, 2011 at 10:08 AM

There was an AP story last week that said 7% unemployment is the new natural level of unemployment. Used to be 4.5%. Natural level of UI is basically the level of unemployment in a perfect economy. No matter how good the economy is there will always be some people unemployed since companies fail even during boom times and new entrants into the labor market aren’t employed instantly.

9% when 4.5% is ideal is awful. But 9& when ideal is 7% doesn’t seem so bad. Soon enough the new level will be raised to 8% and when UI drops to 8.5% next year, the headlines will scream UNEMPLOYMENT IS CLOSE TO THE NATURAL RATE!!

angryed on May 26, 2011 at 11:21 AM

Last week the state Small Business winners went to Washington, DC, for National Small Business week, to receive their awards. They expected to meet Obama but he didn’t appear. He spoke to the winners in 2009 and 2010, but this year, when he had an opportunity to speak to the job creators in our country, he was a no-show. He had time for fundraisers, but not to speak to the people his administration says has created 60-80% of the jobs in America.

GrannySunni on May 26, 2011 at 11:48 AM

Last week the state Small Business winners went to Washington, DC, for National Small Business week, to receive their awards. They expected to meet Obama but he didn’t appear. He spoke to the winners in 2009 and 2010, but this year, when he had an opportunity to speak to the job creators in our country, he was a no-show. He had time for fundraisers, but not to speak to the people his administration says has created 60-80% of the jobs in America.

GrannySunni on May 26, 2011 at 11:48 AM

..by not having to endure one of this gas bag’s teeth-whistling collections of blandishments and platitudes, then they were really winners.

The War Planner on May 26, 2011 at 12:23 PM

Obama is the greatest president ever. Right after Carter.

John the Libertarian on May 26, 2011 at 12:37 PM

That Michael Ramirez cartoon is badly outdated. Here’s my updated version.

unclesmrgol on May 26, 2011 at 3:57 PM