Tag Archives: GDP

Back Below “Stall Speed”: 2016 Economy Matches Worst Year since Great Recession, by Wolf Richter

The economy is loaded with too much debt to achieve much in the way of growth. Is it even really growth when the overall debt load is growing faster than the economy? From Wolf Richter at wolfstreet.com:

Gutted Hopes for a Strong Finish.

The consensus forecast by economists predicted that the US economy would grow at an rate of 2.2% in the fourth quarter, as measured by inflation-adjusted GDP. The forecasts ranged from 1.5% to 2.8%. The New York Fed’s “Nowcast” pegged it at 2.1%, and the Atlanta Fed’s “GDPNow” at 2.9%. And today, the Bureau of Economic Analysis reported that growth in the fourth quarter was a measly 1.9%.

That was down from 3.5% in the third quarter, a spurt that had once again given rise to the now gutted hopes that the US economy would finally emerge from its stall speed. But instead it has slowed down.

For the year 2016, the growth rate dropped to 1.6%. It was worse even than 2013, when GDP growth tottered along at 1.7%. And it matched the growth rate in 2011. Both 2016 and 2011 were the worst since 2009 when the US was in the middle of the Great Recession:

In fact, over the past 50 years, anytime the economy grew less than 2% in a year, it was either already in a recession for part of the year, or there’d be a recession the following year. Hence “stall speed” – a speed that is too slow to keep the economy from stalling altogether.

To continue reading: Back Below “Stall Speed”: 2016 Economy Matches Worst Year since Great Recession

Why this Economy Feels Even Lousier than the Lousy GDP Print: Your Slice of the Economic Pie is Shrinking, by Wolf Richter

What happens when you start looking at economic statitistics on a per capita basis? They look even worse than the usually reported aggregate numbers. From Wolf Richter at wolfstreet.com:

The meme that 14 million jobs have been created since the Great Recession is constantly held up as proof that the labor market has healed, or has practically healed, even if there are a few soft spots left over – such as the pandemic lousiness of the jobs that have been created.

In official circles, the sound of folks patting themselves on the back is deafening. But for many working-age Americans, who have to compete with each other in the labor market, reality is tough.

Turns out, the US population, currently at 323.2 million, has grown by 16.5 million people since the Great Recession. Which is exactly why the unemployment problem has become so intractable: job growth has been less than population growth!

While slow economic growth might look OK-ish on paper overall, but in a country with significant population growth, it’s toxic on a per-capita level – and that per-capita level isn’t theoretical. It’s what people actually experience.

That scenario just played out with the Advance Estimate for first-quarter GDP, released on Thursday. Economic growth compared to the prior quarter was a miserably small 0.5% annualized, which means if the rest of the year is like this, total economic growth for the year will be 0.5%.

These numbers are adjusted for a version of inflation. One tiny understatement of inflation, purposefully or by statistical accident, would drive this “real” economic growth into the negative, meaning economic shrinkage. That’s bad enough.

But on a per-capita basis it’s even worse.

The Bureau of Economic Analysis, which produces the GDP reports, hushes up per-capita GDP because it would look too awful and therefore is not a metric the public should know about. But Doug Short at Advisor Perspectives tracks per-capita GDP. He uses the population data made available by the St. Louis Fed, which gets its population data from, well, um, the Bureau of Economic Analysis.

You guessed it: the BLS could publish per-capita GDP without breaking a sweat as part of its release. It already has all the data. But no.

And here is why it needs to be hushed up: Per-capita economic growth in the first quarter compared to the prior quarter was negative 0.3%!

In other words, the economic pie grew at a barely noticeable annualized rate of 0.5%, but this slightly larger pie has to be cut into even more slices, and each slice shrank by 0.3%.
Since the Great Recession ended officially, there have been six quarters when per-capita GDP was negative. The 10-year moving average of per-capita GDP is now down to 0.46%, the lowest in the data series going back to 1969.

Compared to the first quarter 2015, per-capita GDP in the first quarter 2016 was 1.13% higher. This year-over-year change was so small that it is associated with recessions.

To continue reading: Why this Economy Feels Even Lousier than the Lousy GDP Print: Your Slice of the Economic Pie is Shrinking