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.