Two big economic indicators got released by the government today, including the final estimate of gross domestic product in Q1 of this year. The annualized GDP rate remained unchanged from the second (interim) estimate at 1.9%, well below 2011Q4’s 3.0%:
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 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.0 percent.
The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was also 1.9 percent.
The good news? That’s almost all actual sales and not inventory adjustments. Real final sales of domestic product rose 1.8%, meaning that inventory additions only account for 0.1% of the overall GDP increase for the quarter. That should put the US economy in better position than previous quarters, but that will only help if demand returns.
The other indicator out today, initial jobless claims, doesn’t exactly point to a robust demand in Q2, though:
In the week ending June 23, the advance figure for seasonally adjusted initial claims was 386,000, a decrease of 6,000 from the previous week’s revised figure of 392,000. The 4-week moving average was 386,750, a decrease of 750 from the previous week’s revised average of 387,500.
The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending June 16, unchanged from the prior week’s unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending June 16 was 3,296,000, a decrease of 15,000 from the preceding week’s revised level of 3,311,000. The 4-week moving average was 3,306,000, an increase of 9,250 from the preceding week’s revised average of 3,296,750.
Last week’s announced level of claims was 387,000, not 392,000, as the DoL upwardly revised its estimate for the 69th week out of 70, or 70th out of 71; I’ve actually lost count. Suffice it to say that if these were coin flips in BCS overtime games and they consistently favored the home team, Orrin Hatch would be calling for Senate hearings on the subject. Anyway, this isn’t much of a change at all, keeping jobless claims at the same slightly elevated level we’ve seen over the last six or seven weeks from earlier in the year. That does not bode well for next week’s jobs report for June, which means that Barack Obama might have another media debacle on his hands.
Reuters takes an uncharacteristically gloomy view of the latest data:
The U.S. economy slowed as expected in the first quarter, but a less robust pace of consumer spending and export growth than previously estimated could dampen the economic outlook for the current period.
In separate reports, jobless claims for the week edged lower and a gauge of prices rose more than expected. …
Consumer spending, which accounts for about 70 percent of U.S. economic activity, increased at a 2.5 percent rate in first quarter, rather than the previously reported 2.7 percent pace.
There are signs that consumer spending slowed in the second quarter, with retail sales falling in April and May.
Business inventories increased $54.4 billion, instead of $57.7 billion, adding only 0.10 percentage point to GDP growth compared with 0.21 percentage point in the previous estimate.
Politically speaking, this plays into Mitt Romney’s hands and makes Obama’s path to re-election more difficult. There seems to be little reason to believe that the economy will suddenly improve this summer, and with consumer confidence eroding quickly, we may find ourselves in a new recession by the time Election Day arrives. Still, as I write in my column for The Fiscal Times, Romney has to be careful about how he approaches the economy on the campaign trail — and has only to recall what happened to another presidential challenger from Massachusetts as a reminder:
Still, Romney has to take care not to overshoot the message. John Kerry tried running against the economy in 2004 by painting it as a “jobless recovery,” only to have the rug pulled out from under him as jobs returned in massive numbers throughout the year. The fundamentals of that recovery were much stronger than today’s, so it’s unlikely at this point that a turnaround could arrive in time to transform the economy from a liability to an asset for Obama as happened to Bush in his re-election effort.
Romney also has to take care to avoid being painted as cheering for misery. In order to do so, he needs to point out the overall direction of economic indicators and explain how his policies would produce better results, a skill which Romney has displayed consistently this year.
While we may not know what the economy will look like exactly on Election Day, most voters will have made up their mind about it by Labor Day. Obama has that much time to hope for a miracle, while Romney has that much time to explain why it won’t come until after voters change America’s political leadership, starting at the top.
That second point is key. Americans want America to succeed, including (and maybe especially) conservatives, no matter who’s in charge at the moment. We point out the economic data not to take delight in failure, but to point it out so that failed economic approaches get discarded and pro-growth policies adopted. If Obama had done that, we’d be cheering a real economic recovery at this point, not saying I told you so as the failures mount. That’s what Romney has to communicate on the campaign trail — and he has to be ready to respond if the news turns more positive by pointing out how that can be accelerated by better policy.