Final estimate of Q2 GDP still 2.5%

posted at 9:21 am on September 26, 2013 by Ed Morrissey

The final iteration of Q2 GDP reaffirmed the previous estimate released last month, showing that the US economy expanded at an annualized rate of 2.5% in the second quarter.  However, a few adjustments might portend a slowdown rather than an acceleration for the rest of the year:

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 2.5 percent in the second quarter of 2013 (that is, from the first quarter to the second quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.1 percent.

That’s better than Q1, which finished at a paltry 1.1%, but still not terribly impressive four years into a recovery.  In order to generate enough jobs to put the marginalized millions back to work, we need to see sustained growth at the 4% level. We hit that level only once in the past four years, and haven’t come close to sustaining it.  Instead, the Great Recession has been followed by the Great Stagnation, and this is just another installment of it.

The good news is that real final sales of domestic product nearly kept pace at 2.1%, which means that most of the growth seen in Q2 didn’t come from inventory expansion.  The bad news is that the expansion — such as it is –  won’t continue into Q3 at the same pace, according to the Associated Press:

Many analysts believe growth is slowing to a sluggish rate at or below 2 percent in the current quarter. Economists had initially hoped growth would improve in the second half of the year.

If economists are correct that economic activity slowed this summer, it would mark the third quarter in the last four that growth rates have been 2 percent or lower. Growth in the fourth quarter of 2012 nearly stalled out at a barely discernible 0.1 percent rate and then improved slightly to 1.1 percent growth in the January-March quarter. …

Economists had initially thought that growth would accelerate in the second half of the year behind steady hiring and fading impact from government spending cuts and higher taxes.

But early activity for the quarter has been discouraging. Consumers spent more cautiously in July as their income barely increased. The government spending cuts have weighed on defense spending and business investment. And higher mortgage rates now threaten to slow a housing recovery that had been a solid contributor to growth in the first half of the year.

Even the job gains from earlier in the year appear to be slowing. Employers have added an average of just 155,000 jobs a month since April, down from an average of 205,000 for the first four months of the year.

Some economists worry that growth remains too weak to accelerate hiring, boost pay and encourage Americans to spend more. Consumer spending drives roughly 70 percent of economic activity.

The “jobs gains” has never been much above the treading-water level anyway.  Adding 155K jobs a month only barely keeps pace with population growth.  Even a sustained level of 205K per month would take six years to make up for 4 million workers who have left the work force since the recovery began.  We need job growth of 350K-400K to make a serious dent in the chronic unemployment problem, and again, we’re not even getting close to having that kind of expansion.

What could provide that spark?  Aggressively producing more of our own energy would help lower business costs and create jobs on their own, as would a reduction in costly regulatory overhead on businesses — especially that imposed by ObamaCare.  The White House implicitly admitted that much when it postponed enforcement of the employer mandate after businesses stopped hiring full-time workers this year, but that didn’t stop employers from rationally adjusting to future costs.  Incentivizing capital investment through tax reform would also boost the economy.  Until we start pursuing those rational policies, though, don’t expect the Great Stagnation to get any better, and prepare for it to eventually get worse.


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A year from now we will all look back wistfully on these days of rampant and explosive economic growth and sigh “Man, those were some heady times.”

We can console each other as we wait in line outside the People’s Hospitals in -20F weather to get our weekly vitamin supplement.

Bishop on September 26, 2013 at 9:25 AM

The part not mentioned – nominal GDP growth slipped from 3.2% to 3.1%, with the deflator (BLS’s measure of inflation) also dropping to keep the “real” GDP at 2.5%.

As for the jobs, while the media is reporting California has finally caught up on their backlog of jobless claims, I’m not seeing a full catch-up.

Steve Eggleston on September 26, 2013 at 9:26 AM

We can console each other as we wait in line outside the People’s Hospitals in -20F weather to get our weekly vitamin sugar placebo supplement.

Bishop on September 26, 2013 at 9:25 AM

You misspelled “sugar placebo”, with diabetics getting a double dose of it.

I wonder if the Fourth Department clinics will work any better than they did in the Soviet Union without the West to steal innovations from?

Steve Eggleston on September 26, 2013 at 9:28 AM

Just like “Obamacare rates 16% lower than expected”, the O’ Spin Doctors will work feverishly on trumping these numbers while the chin-drizzled media awaits their script for the nightly news..

hillsoftx on September 26, 2013 at 9:31 AM

And retail giant WalMart is not looking good for 3Q and 4Q….(per Bloomberg).

And we know Bloomberg never lies. :-)

PappyD61 on September 26, 2013 at 9:34 AM

Total BS…

PatriotRider on September 26, 2013 at 9:35 AM

Full-time jobs are now part-time, labor participation rate keeps falling, money supply keeps expanding, inflation is masked by product sizes being reduced, food stamp use at record high,…and this is called a “recovery”…total BS…

I could go on and on and on…

PatriotRider on September 26, 2013 at 9:40 AM

Consumers spent more cautiously in July as their income barely increased.

Yeah, this is true in the Rights household where neither my wife nor I have had a raise in over 3 years. And our expenses keep going up. I suppose I should count my blessings that we still have jobs and stop complaining about such trivial things.

Still, the point being that our disposable income has dropped to almost nothing. So, we’re pretty much not doing anything to assist in getting the economy going.

Chris of Rights on September 26, 2013 at 9:40 AM

In less than 5 years we will be a third world economy…

PatriotRider on September 26, 2013 at 9:41 AM

We can console each other as we wait in line outside the People’s Hospitals in -20F weather to get our weekly vitamin supplement.

Bishop on September 26, 2013 at 9:25 AM

That may not be a vitamin supplement depending on your age/state of health.

Gatsu on September 26, 2013 at 9:43 AM

We are in an economic death spiral with no way out…get prepared…

PatriotRider on September 26, 2013 at 9:43 AM

Until we start pursuing those rational policies, though, don’t expect the Great Stagnation to get any better, and prepare for it to eventually get worse.

Rational policies are racist.

The causes of the Great Stagnation are clear but the administration has no intention of doing anything to change that reality. It is by design. Drain the wealth of the nation as quickly as possible and enslave as many citizens as possible in “entitlement programs.”

Happy Nomad on September 26, 2013 at 9:44 AM

Full-time jobs are now part-time, labor participation rate keeps falling, money supply keeps expanding, inflation is masked by product sizes being reduced, food stamp use at record high,…and this is called a “recovery”…total BS…

I could go on and on and on…

PatriotRider on September 26, 2013 at 9:40 AM

[Edited for brevity] We are the Soviet Union.

Happy Nomad on September 26, 2013 at 9:46 AM

That may not be a vitamin supplement depending on your age/state of health.

Gatsu on September 26, 2013 at 9:43 AM

Fool, now the secret may get out and the serfs will show discontent. On the other hand the Domestic Security Force will get to practice their techniques, so it’s not all bad.

Bishop on September 26, 2013 at 9:49 AM

In order to generate enough jobs to put the marginalized millions back to work, we need to see sustained growth at the 4% level.

At this point in time I suspect we need closer to 5-6% real GDP to accomplish that, not the adjusted and re-adjusted numbers the Fed puts out. And that isn’t going to happen anytime soon. We just keep going further and further backward or at best treading water one or two quarters during the last five years. And once inflation heats up we are toast.

Johnnyreb on September 26, 2013 at 9:49 AM

Didn’t you hear? First time unemployment claims are at a 6 year low! At ONLY 305,000
Yay us!

/

LtGenRob on September 26, 2013 at 9:52 AM

Fool, now the secret may get out and the serfs will show discontent. On the other hand the Domestic Security Force will get to practice their techniques, so it’s not all bad.

Bishop on September 26, 2013 at 9:49 AM

Just think of all the prizes you’ll be able to win by denouncing friends and neighbors for disloyal thoughts about dear leader!

Happy Nomad on September 26, 2013 at 9:55 AM

Business sucks. I can tell you that. I sell globally, online. I had a great first quarter. About April, things got slow and they have stayed that way. The US is kind of perking along, down somewhat, but it hasn’t been a really huge portion of my sales for years. Europe is way down. So is South America. Asia… might has well have been hit by a meteor, except for Australia, which is way down.

Take it for the anecdotal evidence that it is.

trigon on September 26, 2013 at 9:55 AM

We can console each other as we wait in line outside the People’s Hospitals in -20F weather to get our weekly vitamin supplement.

Bishop on September 26, 2013 at 9:25 AM

That may not be a vitamin supplement depending on your age/state of health.

Gatsu on September 26, 2013 at 9:43 AM

Proggies just hate that self-medication business, you know it just reeks of personal responsibility. They would prefer that you should need a prescription to buy vitamins.

slickwillie2001 on September 26, 2013 at 9:56 AM

inflation is masked by product sizes being reduced

PatriotRider on September 26, 2013 at 9:40 AM

This. I noticed Walmart or Kroger is selling Hamburger in 14 ounce packages now. They have been doing for quite some time in pre packaged meats like hotdogs and sausages. They went from 16 ounces to 14 ounces last year with the same price and now some are selling 12 ounce packages for the same price that 16 ounce ones were going for in the last year or so.

Johnnyreb on September 26, 2013 at 10:00 AM

Steady as she goes! Reagan’s 8.20% growth came at the expense of widows, orphans, puppies, trees, flowers and peace. ‘Cause everybody knows the economy can only expand when more people become homeless and when the war machine is in full swing (Granada anyone?) and when old people are denied medical care. We should all thank Obama for his central planning.

/Left

mankai on September 26, 2013 at 10:01 AM

Just think of all the prizes you’ll be able to win by denouncing friends and neighbors for disloyal thoughts about dear leader!

Happy Nomad on September 26, 2013 at 9:55 AM

I’ve started already, I called the IRS and told them my father is under-reporting his income. The old man wasn’t too happy but that’s what he gets for grounding that one time when I was 7.

Bishop on September 26, 2013 at 10:02 AM

Welcome to the new “normal”. Thank you Obama!

GarandFan on September 26, 2013 at 10:03 AM

This. I noticed Walmart or Kroger is selling Hamburger in 14 ounce packages now. They have been doing for quite some time in pre packaged meats like hotdogs and sausages. They went from 16 ounces to 14 ounces last year with the same price and now some are selling 12 ounce packages for the same price that 16 ounce ones were going for in the last year or so.

Johnnyreb on September 26, 2013 at 10:00 AM

That’s immediately reflected in chained measures of inflation.

Steve Eggleston on September 26, 2013 at 10:12 AM

What would the GDP be without the growth in oil and gas drilling/production that 0 has tried so hard to curtail? I suspect somewhere close to 1%, if that. Midland Texas, a big oil area, currently has 3.2% unemployment, and things are booming in similar areas.

iurockhead on September 26, 2013 at 10:15 AM

Didn’t you hear? First time unemployment claims are at a 6 year low! At ONLY 305,000
Yay us!

/

LtGenRob on September 26, 2013 at 9:52 AM

There’s no one left to lay off.

Chris of Rights on September 26, 2013 at 10:16 AM

[Edited for brevity] We are the Soviet Union.

Happy Nomad on September 26, 2013 at 9:46 AM

I prefer to call it the good ole’ U.S.S.A.

Chris of Rights on September 26, 2013 at 10:17 AM

Well… we should stay on the path. No need to do anything else. Taper didn’t happen and we are QEfinity to the end. Jimmy Carter will get things worked out. That’s what his speech writer told us back in ’08.

LoganSix on September 26, 2013 at 10:56 AM

Lackluster is the new booming. Have a mediocre day.

John Deaux on September 26, 2013 at 11:03 AM

These numbers confirm that we remain in the weakest economic ‘recovery’ since the Second World War.

The reason is firmly entrenched in the policies of the Obama Administration which remain anti-business and anti-business / economic growth and focus on the continued expansion of power and influence of the federal government.

The FED has added nearly $4 trillion to it’s balance sheet and remains committed on pumping $85 billion monthly via continued QE.

The federal government has added nearly $7 trillion to the national debt – and is still spending $700 billion more this year than it is taking in, even with the record setting tax revenues that the federal government yanks out of the national economy. The ‘one time’ stimulus bill passed in March 2009 remains entrenched in every annual budget / CR passed by Congress since that date….and we still are struggling to surpass 2.5% GDP growth or generate sufficient jobs.

Obamacare, the Administration’s anti-fracking / anti-energy initiatives, increased federal taxes and fees combined with rising state and local taxes and fees, will place even more pressure on an economy that is being managed as if Cloward and Piven were at the helm.

Meanwhile, the majority of the lamestream media and DNC apparatchiks continue to lie, spin, and misdirect refusing to admit that not only is the emperor not wearing any clothes, but his mission is not to fix the problems or end the crisis.

Athos on September 26, 2013 at 11:16 AM

Well at least he thought he’d figured out whose ass to kick, but that didn’t work out either.

As badly as things go for this guy, I’m a bit concerned about this healthcare thingie.

Oh well, time to open a dialogue with Iran and close off any with Republicans.

Pivot!

Meremortal on September 26, 2013 at 11:21 AM

And then in the harsh light of REALITY we see:

For this set of revisions the BEA assumed annualized net aggregate inflation of 0.58%. In contrast, during the second quarter (i.e., from March to June) the seasonally adjusted CPI-U index published by the Bureau of Labor Statistics (BLS) rose by 1.04% (annualized), and the price index published by the Billion Prices Project (BPP) rose at an annualized rate of 1.76%. As a reminder: an understatement of assumed inflation increases the reported headline number — and in this case the BEA’s relatively low “deflater” boosted the published headline rate. If the CPI-U had been used to convert the “nominal” GDP numbers into “real” numbers, the reported headline growth rate would have been a somewhat lower +2.03%. And if the BPP index (which arguably best reflects the experiences of the American consumer) had be used as the “deflater,” the economy would have been a more modest +1.31% annualized rate.

http://www.consumerindexes.com/

dogsoldier on September 26, 2013 at 12:33 PM

We have another great victory for Keynesianism, or if you believe even Keynes would have held is nose at Obama’s domestic policy, we have another great victory for Obamaianism.

burt on September 26, 2013 at 2:15 PM

Johnnyreb on September 26, 2013 at 10:00 AM

That is how many companies started doing it when the gas prices and energy prices spiked. Same packaging but a tad bit less in them over time.

Not many people pay attention to the weight of the packages. If the box looks the same they dont even know. Its kinda like the movie theater boxed candy… nice big boxes with little in them… its like the packaging cost more than the contents.

watertown on September 26, 2013 at 2:31 PM