CBS: Don’t expect the economy to rebound significantly

posted at 10:41 am on May 30, 2014 by Ed Morrissey

After yesterday’s sharp downward revision to Q1 GDP put the US economy firmly in contraction, many analysts insisted that the results were anomalous. CNN called the -1.0% result “not a big deal,” and insisted that the spring would have a “bounce back” in economic activity. Reuters chalked it up to bad weather in winter. Others pointed to gains in the housing market and falling unemployment to argue that the rebound had already begun.

Not so fast, CBS analyst Constantine von Hoffman warns. Contractions are rare enough events outside of actual recessions that they’re hardly “not a big deal,” and the economic indicators on which the sunny optimism relies actually are not as positive as their top-line numbers suggest. For instance, the housing market is only gaining for a narrow slice of inventory, while the rest of the market is stagnating — or worse:

While the overall price of homes has increased, the numbers of homes being sold has decreased. The price rise stems from a schism in the real estate market: Sales of the priciest 1 percent of homes continue to increase, even as they fall for the other 99 percent.

A report released Tuesday by real estate research firm Redfin found that sales of the most expensive homes were up 21.1 percent through April of this year, while they’ve fallen 7.6 percent for the rest of the market. That follows a gain of 35.7 percent in 2013 for the top 1 percent and just 10.1 percent for less expensive homes. In 2012, sales increased by 17.5 percent and 2.9 percent, respectively.

The report noted: “While home sales have shown meager to modest gains in the non-luxury portion of the market in Oakland (up 2.2 percent over last year), Miami (up 1 percent), Raleigh-Durham (up 1.2 percent) and Atlanta (up 4.8 percent), other markets including Phoenix (down 15.7 percent) and Minneapolis (down 12.5 percent) display a strange (and perhaps troubling) dichotomy: For the top 1 percent, the housing market is still booming. But for the rest of the market, the recovery is running out of gas. As home prices have risen, wage and job growth have failed to keep up.”

On employment, the jobs being created are significantly short of what is needed to get people back in the labor force, and lower paying than the jobs that are being lost:

“It’s what we typically think of as middle-skilled workers — for example, construction workers, machine operators and administrative support personnel — that are hardest hit during recessions,” William C. Dudley, president of the New York Federal Reserve said in a speech last week. “Further, a feature of the Great Recession and indeed the prior two recessions is that the middle-skill jobs that were lost don’t all come back during the recoveries that follow. Instead, job opportunities have tended to shift toward higher- and lower-skilled workers.”

Middle-skilled workers frequently have to take lower-paying, lower-skilled jobs when their jobs disappear. According to the Bureau of Labor Statistics, the economy added 288,000 jobs in April. Of these, 24,000 came from temporary business help services, 35,000 were retail jobs, 40,000 were education and health services and 15,000 were in what is called “other services.” The report noted that within this sector, “employment in personal and laundry services continued to trend up; this industry has added 32,000 jobs over the past 12 months.”

The one good sign from yesterday’s BEA report was that consumer spending continues to grow over the 3% mark. That’s not a good sign in and of itself — consumers can have irrational spending habits just the same way investors can have “irrational exuberance.” Its value comes as an indirect measure of the economy more than just the contribution it makes to the GDP. It gives a solid indication that consumers are experiencing the actual on-the-ground economy in a positive way.

Even that positive gloss was countered by the significant drop-off in business investment in Q1. That indicates that investors and owners are battening down hatches for the near future rather than getting ready to revel in a sharp rebound. We’ll see which group has a better handle on the economic future, but von Hoffman’s skepticism looks like better advice than shrugging off a -1.0% GDP result as “not a big deal.”

Update: Megan McArdle doesn’t buy the “not a big deal” theory either:

Key areas of decline were exports, inventories and nonresidential fixed investment. In other words, whatever happened was happening on the business side.

This doesn’t necessarily signal a slide into another recession, so don’t rush out to change your money into gold certificates and canned goods. The lousy weather could easily have depressed all three categories, after all. The markets aren’t freaking out; they were expecting this downward revision.

That said, as I wrote last month, this is a sign of an economy that is still very weak. It has been six years since the financial crisis. Federal government spending is still around 21 percent of GDP, up from 19 percent in 2007, and the Federal Reserve still has a very expansive monetary policy. Under those circumstances, a quarter of negative growth is pretty unsettling.

Via Instapundit.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Look for the WH to change the definition of recession before the next quarter’s numbers are released.

NotCoach on May 30, 2014 at 10:45 AM

Rebound from what, the near perfection of a vibrant economy that the demorats are touting?

Bishop on May 30, 2014 at 10:51 AM

Don’t expect it to rebound significantly? Did anyone think it was going to?

major dad on May 30, 2014 at 10:51 AM

Consumer spending up 3% after tax refund checks rolled in.

Obamacare added 1% to GDP artificially.

This economy is an f’n centrally planned disaster.

Defenestratus on May 30, 2014 at 10:52 AM

The economy won’t improve until we get a president and Congress who favor deregulation. We have an arbitrary and capricious federal bureaucracy that is at war with the American people.

rbj on May 30, 2014 at 10:53 AM

It has been six years since the financial crisis. Federal government spending is still around 21 percent of GDP, up from 19 percent in 2007, and the Federal Reserve still has a very expansive monetary policy. Under those circumstances, a quarter of negative growth is pretty unsettling.

No doubt the bottom will fall out eventually. It’s only a question of when not if.

tommyboy on May 30, 2014 at 10:53 AM

Rebound from what, the near perfection of a vibrant economy that the demorats are touting?
Bishop on May 30, 2014 at 10:51 AM

LOL. Great point. I guess “rebound” is a polite euphemism for “stop falling off a cliff”

tommyboy on May 30, 2014 at 10:56 AM

Don’t expect it to rebound significantly? Did anyone think it was going to?

major dad on May 30, 2014 at 10:51 AM

What’s funny is that if next quarter comes in at 0.1% like the initial GDP figure we just got, the Democrat/media complex probably will treat that like a huge rebound.

It’s absolutely embarrassing the kind of spin they’ll resort to in order to protect Obama. -1% GDP IS a big f’ing deal.

Doughboy on May 30, 2014 at 10:56 AM

I think I remember during the Reagan boom that cold weather was to blame (explain) HIGH GDP rates. You know, high demand for coal,, heating oil, transportation of those goods to consumers and all the economic activity that goes into keeping humans warm, food on the table and their things (like autos) functioning.

Now, bad weather, what? Depresses consumer shopping? In a era where you can buy stuff online?

What I keep wondering is why this GDP revision was pretty much “hidden” everywhere (including Drudge) farther down the page. After all, it must be REALLY bad if the Obama administration has massaged the numbers like always and it STILL comes out as -1%

MistyLane on May 30, 2014 at 10:57 AM

Attention liberals- if Obama were a Republican you’d be here screaming your pot-addled heads off that this was a recovery for the rich.

This is your daily reminder.

Chuck Schick on May 30, 2014 at 11:00 AM

Is there such a thing as a downward rebound?

battalion on May 30, 2014 at 11:03 AM

And considering that Q1 saw the biggest increase in healthcare spending since 1980 – which is 1/6 of our economy – we still shrank 1%. So that’s a big effing deal.

Chuck Schick on May 30, 2014 at 11:03 AM

Why aren’t we having daily MSM reports on the “worst economy since the Jamestown starvation?” That’s what we got nonstop with Dubya in office.

Double standards, per normal.

Wino on May 30, 2014 at 11:04 AM

Rebound is funny, when you have dug a hole 10 foot deep and you jump up 6 feet, you are still 4 feet deep.

If gas ever dropped below $3, journalist would rejoice and call it a major economic change…if unemployment gets to 5%, they will consider it “mission accomplished”.

The same geniuses who when a budget is presented that is 10% increase, and it is settled to be just 7%, consider that a 3% savings, a 3% budget cut.

right2bright on May 30, 2014 at 11:04 AM

This is unexpected.

Bigbullets on May 30, 2014 at 11:07 AM

Recovery Summer Part ??

Pelosi Schmelosi on May 30, 2014 at 11:08 AM

Don’t worry- the Administration and our political masters in Congress will bump up government spending to get that old GDP booming again.

Its like when you take money out of your savings account (the taxpayers’ pocket) and move it into your checking account (political cronies’ pockets); it means you have actually created new money you can just spend and spend and spend…

Until the savings account runs dry, and then you can tap your 401K (taxpayer’s 401Ks- the last big piggybank).

Dolce Far Niente on May 30, 2014 at 11:09 AM

CBS: Don’t expect the economy to rebound significantly

Well, it is currently CONTRACTING, so maybe CBS can
re-word their expectations….

ToddPA on May 30, 2014 at 11:09 AM

Why aren’t we having daily MSM reports on the “worst economy since the Jamestown starvation?”

Wino on May 30, 2014 at 11:04 AM

LMAO!

ToddPA on May 30, 2014 at 11:10 AM

So energy and food prices are going up… I wonder why consumer spending is rising? Or don’t they count that in there?

As others have pointed out. If this were an R president it would be: Run for the hills!,, headlines 24 7

WitchDoctor on May 30, 2014 at 11:11 AM

Is there such a thing as a downward rebound? battalion on May 30, 2014 at 11:03 AM

It’s rebounds all the way down.

Akzed on May 30, 2014 at 11:12 AM

All part of the plan. When the Dems spoke of a “reset button” what they were really referring to is their desire to collapse the American system and reset it according to their own desires.

People deserve what they’re getting, however, because they voted for the Dems and their idiot policies. Their federal sugar daddy is going to run out of other people’s money eventually, and watch out then.

xNavigator on May 30, 2014 at 11:14 AM

Ain’t Obamanomics wonderful? When will Sheriff Joe announce another “Summer of Recovery”?

GarandFan on May 30, 2014 at 11:14 AM

What ?!?

Recovery Summer V hasn’t even started yet .. and it’s already a failure ?

J_Crater on May 30, 2014 at 11:15 AM

We expect nothing from Obama . . . and that’s exactly what we get.

rplat on May 30, 2014 at 11:19 AM

They have a gift for the obvious at Black Rock

formwiz on May 30, 2014 at 11:25 AM

Our economy, and society, is flipping upside down with no middle. Just like Socialism…

HiJack on May 30, 2014 at 11:33 AM

People deserve what they’re getting, however, because they voted for the Dems and their idiot policies. Their federal sugar daddy is going to run out of other people’s money eventually, and watch out then.

I’m kinda looking forward to taking my revenge on those who voted for the Dems and will end up terrorizing my neighborhood.

HiJack on May 30, 2014 at 11:35 AM

10-year Treasury Bonds had a yield at Wednesday market close of an abysmal 2.44%.

So See-BS has grasped the obvious though I’m sure they’re trying to find a way to shield our Kenyan Pharaoh from it.

viking01 on May 30, 2014 at 11:41 AM

We live in Obamaville and are mired in the ObamaDepression, directly because of Obama’s failed, Marxist policies. And the economy will continue to stagnate or even get worse as long as he’s occupying the White House.

Meople on May 30, 2014 at 11:50 AM

ObamaRecession.
ObamaDepression.

albill on May 30, 2014 at 11:51 AM

Just like they tout the unemployment figures, the amount of people applying for bennies are down and it’s supposed to be a big deal but they never talk about the labor participation rate, that’s taboo.

major dad on May 30, 2014 at 11:53 AM

Just like they tout the unemployment figures, the amount of people applying for bennies are down and it’s supposed to be a big deal but they never talk about the labor participation rate, that’s taboo.

major dad on May 30, 2014 at 11:53 AM

Yes, they’ve been omitting that little figure since The One’s first day in office.

Because it wouldn’t look good for him and the rest of the Dims if the reported unemployment number was north of 12%. Couldn’t have that, that would be…truthful.

Meople on May 30, 2014 at 11:56 AM

Rebound from what, the near perfection of a vibrant economy that the demorats are touting?
Bishop on May 30, 2014 at 10:51 AM

LOL. Great point. I guess “rebound” is a polite euphemism for “stop falling off a cliff”

tommyboy on May 30, 2014 at 10:56 AM

It’s a ‘dead cat bounce rebound’.

Midas on May 30, 2014 at 11:59 AM

William C. Dudley, “Further, a feature of the Great Recession and indeed the prior two recessions is that the middle-skill jobs that were lost don’t all come back during the recoveries that follow. Instead, job opportunities have tended to shift toward higher- and lower-skilled workers.”

Middle-skilled workers frequently have to take lower-paying, lower-skilled jobs when their jobs disappear.

I would hope that many of the middle-skilled workers realized and found opportunity to gain more education during the recession. I know of a few people that started school again at the same time I was in college. They knew their construction jobs wouldn’t be available again and wanted to be able to jump into management rather than resort to the low-skilled positions as noted.

Effay5 on May 30, 2014 at 12:01 PM

My take from my little part of the world…

Business is spotty, but generally fair here in the US. My overseas business, particularly from Europe, has fallen off the map. From Asia, nothing at all.

Since things kind of suck and I don’t have to put a huge amount of time into shipping, I’m going to expand a bit and see if that helps.

trigon on May 30, 2014 at 12:02 PM

CBS: Don’t expect the economy to rebound significantly

Didn’t need the advice. My expectations have been set at zero for six years and I haven’t been surprised yet.

lynncgb on May 30, 2014 at 12:03 PM

Rising house prices don’t reflect a good economy, just a shortage in inventory and rising cost of building materials since the last building boom.

Tater Salad on May 30, 2014 at 12:04 PM

Down 1% doesn’t reflect the point that Obamacare *added* 1% to begin with.

We’re down over 2%, folks.

But no worries – Obamacare will fix it. And unemployment will magically drop below another threshold in time for the elections again.

All is well, citizen. Now get back to work ya racist, if you still have a job – there are tens of millions of ungrateful yet more deserving people relying on your paycheck.

Midas on May 30, 2014 at 12:05 PM

Economic growth is racist and leads to bad things like income inequality and people getting off of welfare checks.
By 2016 economic growth will be sexist and lead to bad things like income inequality and people having to rely on themselves and stuff…

DublOh7 on May 30, 2014 at 12:05 PM

Economic growth is racist and leads to bad things like income inequality and people getting off of welfare checks. Of course, by 2016 economic growth will be sexist and lead to bad things like income inequality and people having to rely on themselves and stuff…

DublOh7 on May 30, 2014 at 12:05 PM

The next GOP president has the chance to be considered a great one given the pent up demand created by fear of the government, we better pick the right one.

Tater Salad on May 30, 2014 at 12:06 PM

Rising house prices don’t reflect a good economy, just a shortage in inventory and rising cost of building materials since the last building boom.

Tater Salad on May 30, 2014 at 12:04 PM

Very true. And just to add to your point, a rise of percent or two, really doesn’t have much effect when we’re still under water by 30-40% from the start of the ObamaDepression.

Meople on May 30, 2014 at 12:09 PM

Real estate is local so I don’t think you can use performance all over the country to judge. I have a place I would love to sell. So do others and 3/8 of the units are officially on the market. I’m holding back.

We have a president who doesn’t understand any of what drives the economy. He’s hell-bent on making his socialist changes, consequences be damned. Unfortunately he believes everything he says and we’re stuck with a stagnant economy for another 2 1/2 years.

COgirl on May 30, 2014 at 12:21 PM

Rising house prices don’t reflect a good economy, just a shortage in inventory and rising cost of building materials since the last building boom.

Tater Salad on May 30, 2014 at 12:04 PM

Very true. And just to add to your point, a rise of percent or two, really doesn’t have much effect when we’re still under water by 30-40% from the start of the ObamaDepression.

Meople on May 30, 2014 at 12:09 PM

Two other thoughts on house prices. First, the reason for the increase is in the artificially low interest rates which allow buyers to afford more house. The second is rising house prices don’t directly add to the economy because it doesn’t directly add money into peoples wallets or grow the economy.

Tater Salad on May 30, 2014 at 12:31 PM

Two other thoughts on house prices. First, the reason for the increase is in the artificially low interest rates which allow buyers to afford more house. The second is rising house prices don’t directly add to the economy because it doesn’t directly add money into peoples wallets or grow the economy.

Tater Salad on May 30, 2014 at 12:31 PM

And isn’t the mortgage deduction on our taxes going away this year? I thought that was part of the Trillion dollar tax hike that Oblahblah did last year. Not sure though.

If that’s the case, that’s going to be yet another big factor that people will start taking in the wallets next April.

Meople on May 30, 2014 at 12:36 PM

Yeah, those negative growth quarters could be a little stronger, but under the guidance of Dear Reader, we will rebound right back up to zero real soon.

The MSM

Ray Van Dune on May 30, 2014 at 12:49 PM

I don’t believe the interest deduction is going away. Too hot politically to change that.

COgirl on May 30, 2014 at 1:06 PM

But you do have to pay the Obama tax on real estate sales. Don’t think your personal home is exempt from that.

COgirl on May 30, 2014 at 1:07 PM

COgirl on May 30, 2014 at 1:06 PM

Ah, k. Thanks, wasn’t sure about that.

COgirl on May 30, 2014 at 1:07 PM

Yep, I think we’ll be taking it in the shorts because of Obama for years, maybe decades to come.

Meople on May 30, 2014 at 1:12 PM

Rebound. It’s in free fall. Will another 800,000 Americans give up looking for work this month as well.

leader4hru on May 30, 2014 at 1:31 PM

I use the eyeball test. Each day I drive along one of the most traveled city roads in Texas. I see open storefronts everywhere. There’s no way this country is about to hit 4 percent. Anyone thinking that lives in Washington or Manhattan.

K. Hobbit on May 30, 2014 at 1:35 PM

“The one good sign from yesterday’s BEA report was that consumer spending continues to grow over the 3% mark.”

That was yesterday. Today, the administration disclosed that consumer spending plunged last month after a surge the month before based on speeding savings.

http://www.zerohedge.com/news/2014-05-30/what-q2-gdp-surge-after-march-spending-spree-tapped-out-consumers-had-biggest-spendi

This is looking very much like a 1937-style recession within a depression

Bart DePalma on May 30, 2014 at 1:37 PM

Related – nominal (non-inflation-adjusted) personal spending fell by 0.1%, well off expectations of a 0.2% increase. That just happens to be the first third of the Personal Consumption Expenditures portion of GDP.

The Presstorian Guard – Economic Division is blaming…wait for it…wait for it…the cold winter for that.

Steve Eggleston on May 30, 2014 at 1:40 PM

This is looking very much like a 1937-style recession within a depression

Bart DePalma on May 30, 2014 at 1:37 PM

Point of order – when future generations look at this, they will term the period between 2008 and whenever this finally ends the Son of Great Depression.

Steve Eggleston on May 30, 2014 at 1:42 PM

The rats are bailing on the sinking, Good Ship Obama, as she slowly sinks into the murky, oily depths of the Gulf of Mexico…Maybe that will finally plug that BP Oil Spill hole?? See ya’ Jay Carney, you lying crap weasel…

bimmcorp on May 30, 2014 at 2:02 PM

Business investment is down, and so is private capital investment – the sort that actually funds new start-ups and builds factories, and is not just passed around Wall Street – and these are essential components for growth.

Housing should be evaluated by Freddie Mac’s “MiMi” or multi-market index. This measures overall price trends nationally. A score of 0 means the market is balanced, stable. Scores between +2 and -2 are within range and are considered more indicative of short-term direction. Over +2 is measurable expansion of the market and under -2 is contraction.

Today it is -3.06. Thanks, Obama.

Adjoran on May 30, 2014 at 3:16 PM

You know what would really help our economy?

More taxes and regulations. Works every time it is tried. Well at least for the last five and a half years.

jukin3 on May 30, 2014 at 3:45 PM

IS this the economy that the progressive fascist democrat party and their MSM were worried about Romney taking credit for?

They told me if I voted for Romney that there would be a recession and they were right.

jukin3 on May 30, 2014 at 3:50 PM

Marxist-progressive beat down of first world lifestyles.

real talk.

Murphy9 on May 30, 2014 at 3:55 PM