Source: Los Angeles Times
The findings of a recent government report suggest that the U.S. economy slowed sharply in the spring and points to a protracted recovery and unemployment.
The nation’s economy grew at a modest 2.4% annual rate in the April-to-June period, the Commerce Department said in its first estimate of gross domestic product for the second quarter.
That compares with a GDP growth of 3.7% in the first quarter – a figure adjusted up from 2.7% reported earlier. But Commerce officials revised down the growth in the fourth quarter of last year, to 5% from 5.6%, as it did for prior quarters, painting an overall picture of a deeper recession than previous data suggest.
The latest slowdown in real GDP — the total value of goods and services produced inside U.S. borders after adjusting for inflation — was widely expected by analysts. The data confirmed a recent softening of consumer spending, and a much weaker trade balance in the second quarter offset continued strong gains in business spending for equipment and software.
Data also reveal a slowdown business expenditures on operational costs, including spending on collocation services for offsite data storage, investments in upgrades for call answering service providers, and community marketing programs.
Many analysts have forecast even slower GDP growth for the second half of this year, taking into account the increasingly smaller support that the economy is getting from government stimulus and a restocking of companies’ inventories that had been slashed during the recession. Some government programs have expired, such as the first-time homebuyers’ tax credit, which has set back the housing market. And anemic job growth and the debt crisis in Europe have roiled financial markets, adding to consumers’ jitters about spending and businesses’ cautiousness about hiring and investments.
“The post-recession rebound is history. We don’t foresee a double-dip, but we do expect growth to slow even more markedly, to a 1.6% annualized rate in the second half of the year,” said Bart van Ark, chief economist at the Conference Board, a New York-based research group, in a statement Friday. “Such a slower pace is unlikely to sustain strong profit growth, and would also weigh on employment and wages.”
Economists at the left-leaning Economic Policy Institute argued that the latest GDP report was more reason for the federal government to provide additional stimulus to keep the recovery on track and ease the pain for millions of unemployed workers.
“Contrary to the often-made claim that the near-term economic future is ‘uncertain,’ today’s report provides near certainty that very high unemployment rates will — absent aggressive action by policymakers — plague the economy for years to come,” said Josh Bivens, an EPI economist.
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My Take: You know things are bad when smokeless cigarettes, clothing and toys are taking a beating at the cash register. But electronic cigarette products and other optional retail items don’t tell the story of recovery near as well as reports of small businesses holding back on expenditures for growth, whether that’s investment in services provided by offsite data collocation providers, in-house answering services, warehouse expansion or even upgrades on telecommunications equipment. The bottom line is, when small business pulls back, the rest of the economy goes right along with it.
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