In fairness to the AP, this result could be considered “unexpected.” The march towards recovery appears to have at least temporarily halted in April, as leading economic indicators declined for the first time since last spring. The boost from fourth-quarter inventory management appears to have dissipated, and with it any hope of momentum over the summer:
A private research group’s gauge of future U.S.economic activity unexpectedly slipped in April, the first decline in more than a year and a sign that growth could slow this summer, weighing on hiring.
The Conference Board said Thursday its index of leading economic indicators edged down 0.1 percent last month, the first drop since March 2009. Economists polled by Thomson Reuters had expected a gain of 0.2 percent. …
“Slower growth is likely in store for the second half of the year as the boost from inventories fades away,” said Tim Quinlan, economist at Wells Fargo Securities, in a research note.
Goldman Sachs economists expect growth to slow to an annualized rate of 1.5 percent in the second half of the year from more than 3 percent in the first six months of 2010.
This report came out at 3:50 ET yesterday. As of today, at least according to a Google Reader search of “economic indicators” in my newspaper feeds (which include the New York Times, Washington Post, the Los Angeles Times, the Boston Globe, and more Associated Press clients), the only paper that picked this story up for publication was the Washington Times. Perhaps it was too “unexpected” for newspaper editors to include in the morning editions on a Friday, although it may hit their websites in time for a Friday afternoon reader fade.
A growth rate of 1.5% will not only not create new jobs, it may wind up increasing joblessness as companies stop hiring to replace workers who leave. The anemic hiring we have seen through the first four months of the year was in part predicated on the idea that we had started a modest period of growth after a decimation of the American economy. Instead, it looks like the artificial stimuli had only a temporary effect on expansion, and now that the markets have to deal with rational evaluations of both assets and pricing signals on taxes and debt, the party may be over before it got started.
Politically speaking, an economic retreat will be disastrous for Democrats. The Obama administration has promised a big expansion in the latter half of 2010 and the first part of 2011, with a return to prosperity at about the same time as the next presidential election. Going backwards will expose that as fantasy and leave Democrats holding the bag for a set of failed economic policies that will have left the nation even more deeply in debt than when Democrats took total control of Washington.
They had better hope that the economy starts growing “unexpectedly” instead of shrinking — and in order to do that, Congress will need to find ways to encourage investors to get into the game. At the very least, they need to stop discouraging investors through their massive-spending, nanny-state programs.