GDP Media Coverage, Part 2: Time’s Error-Prone Embarrassment
This afternoon's report at Time.com's misnamed Curious Capitalist blog by Roya Wolverson (“GDP Report: What It Tells Us About the Debt”) is an embarrassing hash of omissions, errors, and gratuitous political points. Ms. Wolverson's most obvious omission is her failure to mention the government's breathtaking downward revision to first quarter gross domestic product growth from the annualized 1.9% announced in late June to today's revised 0.4% . That's a nearly 80% hit to where we thought we were just 30 days ago, indicating how anemic the so-called recovery has been. It also gives one reason to doubt that today's 1.3% figure for the second quarter will hold up in subsequent revisions. What follows are excerpted paragraphs containing just some of Ms. Wolverson's errors and political postures: The bad news just keeps coming. The U.S. economy grew even less than expected in the second quarter, at a rate of 1.3% [1] , down from what many economists predicted would be 1.8% or higher [1] . The reasons for the continued lackluster performance haven't changed. Consumers, squeezed by higher gas and other prices, are buying less of everything from electronics to meals out to new furniture. Japan's tsunami, which raised production costs for U.S. auto makers, hasn't helped. Those factors are keeping a lid on U.S. jobs, which are, of course, the economy's ticket to higher short-term growth. But the dismal overall growth numbers masked some potentially good news for U.S. jobs. On the bright side, businesses spent more (up 6.3%) [2] in the second quarter, and in a rare move, investments in housing ticked up (3.8%). Those are crucial for U.S. job prospects, since the bulk of job creation comes from stifled small businesses, which rely most on a rebound in housing to invest and spend. So far, small business hiring has been dragging for two reasons. One is because those businesses can't get access to credit, and the other is because they're reluctant to borrow given the slew of economic uncertainties ahead. [3] … The good news out of the GDP numbers is, if housing investment continues to tick up and buoy property values, it will provide huge relief where the jobs market (via small banks and small businesses) needs it most. … Another key takeaway from the Commerce Department's GDP report is that much of the drag on growth in the second quarter came from government pullbacks. Government represented 1.23 percentage points of the overall growth drop [4] , with state and local cuts accounting 0.41 percentage points of that and defense cuts making up 0.74 percentage points [4] . The sharp drop off in state and local government spending (a 3.4% drop) [5] reflects the dry up in federal stimulus, which has forced local authorities to slash tens of thousands of jobs and billions of dollars in spending to comply with balanced-budget requirements. The current debt debate is bound to make things worse. … … the very policymakers scrambling to make good on our obligations by slamming on the breaks are the ones threatening to escalate government debt. [6] Notes: [1] — Throughout her report, Wolverson never gives any indication of an understanding that the figures presented are annualized. This will become clearer in a later note, but for now I'll just note that any casual reader will believe that the economy actually got 1.3% bigger in the second quarter, instead of roughly 0.325% bigger. [2] — Business spending went up 7.1%, not 6.3%, as seen in this cobbled-together graphic from Table 1 of the BEA's full report . Wolverson's 6.3% is the figure for nonresidential fixed investment. [3] — Small business credit availability is hardly an issue when there's little desire to hire or expand. Steve Wynn of Wynn Resorts expressed current business sentiment perfectly earlier this month when he referred to the palpable “fear” and “fright” throughout the business community. The Obama administration, including the President himself, his cabinet, his czars, and his frontline regulators are primarily responsible for creating our
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on July 29, 2011. Filed under