U.S. Economic Snapshot

The Second Estimate of Q2 GDP, released on August 29 shows slow, continued growth in many areas, although there isn’t too much to remark on in the current release. The revision for GDP was up, 1.7% from 1.5%. Consumption was revised up the same, from 1.5% to 1.7%, led by an increase in the revision of services, from 1.9% to 2.4%. The graph below plots real GDP comparing this recession and recovery to past ones. A major theme of this blog is that to get an accurate snapshot of where the US economic recovery is, it is necessary to have a benchmark with which to compare. The graphs we present use the comparison of past cycles to guide our understanding of the current economic environment.

Many have commented on the slow growth coming out of the recession and that commentary is likely using the above comparison. Indeed this last recession and the current recovery stand out compared to any seen since the Great Depression. So, comparing against past recessions and recoveries is one way to put things into perspective. Certainly the crisis that struck the world at the end of 2007 and beginning of 2008 was unprecedented, save for the Great Depression. Not only in causes and scope, but also in its global reach. An interesting comparison might be to look at how several European countries have fared relative to the U.S. Each country felt the crisis in different ways and responded in different ways, leading to different outcomes. The graph below shows the percentage change of real GDP from the peak of the business cycle in Europe (2008 Q1) and the U.S. (2007 Q4).

In this perspective the US hasn’t fared so badly. The depth of the recession in the US was not as bad as that felt in Germany, Italy, or the UK. In terms of recovery, the US is on pace with Germany, around 2 percentage points above peak level. In fact, Germany is the only EU country pictured that has positive output growth, while the rest remain stagnant or are actually falling. The point here is that maybe, just maybe, the U.S. and Germany are doing as well as can be expected given the global environment. And yes, we always want more and we want it faster…but it might not be realistic.

Below we present a snapshot of the current recovery in terms of consumption, investment, government spending, exports and imports.
Continue reading “It’s Slow, but it’s Growth” →

Nonfarm payroll employment increased by 163,000 (the median forecast was around 100,000) in July after increasing a revised 64,000 in June and 87,000 in May. The unemployment rate edged up from 8.2% to 8.3%. This increase was in spite of a decrease in labor force participation which decreased from 63.8% to 63.7% and reflected another downward tick in the employment population ratio. Participation is now at historically low levels.

The first report on second quarter real GDP growth was largely as expected after many weak signals. Real GDP grew at a seasonally adjusted annual rate of 1.5% in the second quarter of 2012. Annual benchmark revisions show growth rates of 2.0% (was 1.9%) in Q1 and 4.1% (was 3.0%) in Q4 of 2011. The overall path of the expansion is somewhat weaker as a result, with revisions dating back to 2009 showing 2010 revised down (now 2.4% was 3.0%) with nearly offsetting upward revisions for 2009 (now -3.1%) was -3.5%) and 2011 (now 1.8% was 1.7%).

Revision highlights and low lights

While the revisions did little to the overall path of the recovery, there were some interesting and large revisions to the components. As an example, nonresidential investment and investment in structures saw large upward revisions in growth rates over the past several quarters.

                            Q2 11  Q3 11  Q4 11  Q1 12 
  Nonresidential..........  14.5   19.0    9.5    7.5
   Previously published..   10.3   15.7    5.2    3.1
    Structures............  35.2   20.7   11.5   12.9
      Previously published  22.6   14.4    -.9    1.9

In spite of the stronger picture for these series, there were downward revisions to investment in equipment and software. For this reason it is useful to have a complete picture of the revisions to see how extensive they can be. We present this below.

The most important part of this data release are the preliminary estimates for second quarter GDP and its components. These suggest a weakening and possibly faltering recovery.  Consumption of non-durables increased only very slightly and consumption of durables declined after a strong first quarter rebound that helped the auto sector.  Both exports and imports increased compared to the first quarter.
The evidence suggests that the situation in Europe where most of the economies are contracting again and the slowdown in the emerging margins of Asia are having an effect on the U.S. recovery.  The lengthy contraction in employment is a potent of how severe our “growing pains” are.

In a departure from our standard presentation, we show the revisions explicitly in the following graphs so you can see how the picture of the recovery changes with better information. The magnitude of the revisions raise the question of whether markets overreact to preliminary information about the recovery….or is it simply the business press who over react?

Continue reading “The Recovery in the Rearview Mirror and Discouraging News About Q2” →

The latest Employment Situation report from the Bureau of Labor Statistics shows non-farm payroll employment increased by 80,000 jobs in June. Note that prior payrolls were revised down for April (from +77,000 to +68,000) but up in May (from +69,000 to +77,000). The meager gain was fairly broad-based, both goods producing and service producing employment increased. Professional and business services posted the largest gain, +47,000 with more than half (25,200) coming from temporary help services. The decline in Government employment moderated a bit, declining by 4,000 jobs. Further, there was also a setback in the diffusion index (that measures the percent of industries with expanding employment plus one half of the industries with no change) from 59.8 to 57.9–after two months of consecutive increases.

Are all jobless recoveries alike?

The second estimate of GDP for the first quarter of 2012 and its components shows a much weaker economy than previously thought. After robust growth in real GDP at an annual rate of 3% in the fourth quarter of 2011 the economy slowed markedly to a 1.9% rate in the first quarter. Most of the change was due to downward revisions to state and local government spending and to personal consumption, particularly durables. These were somewhat offset by upward revisions to non-residential fixed investment and exports.

The somewhat negative report from the BEA was reinforced by the Institute for Supply Management’s release of the Purchasing Managers Index, a closely watched barometer of manufacturing activity. It showed a sharp decline to its lowest level since 2009.

Continue reading “Warning Signs! First Quarter GDP Revisions and Disastrous May Jobs Report Show a Weakening Economy” →

Welcome to the Cooley-Rupert Economic Snapshot, our view of the current economic environment. This is the latest version of our snapshot of the U.S. Economy based on the new employment numbers released on Friday by the Bureau of Labor Statistics. The complete Snapshot based on the preliminary estimates of first quarter GDP from the Bureau of Economic Analysis can be found in our previous post.

As in all of our snapshots we present the data in a way that we find particularly useful for assessing where we are in the business cycle and tracking the U.S. economic recovery. The paths of all the series presented are plotted relative to their value at the peak of the respective business cycles. We use the business cycle dates identified by the National Bureau of Economic Research.

You can also find the most recent version of the entire snapshot in pdf form here. As always we welcome any suggestions for additional data that you would like to see and suggestions for how to improve the presentation of the data.

Welcome to the Cooley-Rupert Economic Snapshot, our view of the current economic environment. This is the latest version of our snapshot of the U.S. Economy based on the preliminary first quarter data on National Income and Product from the Bureau of Economic Analysis as well as the March Employment Situation released by the Bureau of Labor Statistics. As in previous snapshots we present the data in a way that we find particularly useful for assessing where we are in the business cycle and tracking the U.S. economic recovery. The paths of all the series presented are plotted relative to the their value at the peak of the respective business cycles. We use the business cycle dates identified by the National Bureau of Economic Research.

We present the data in four sections. The first summarizes the path of Gross Domestic Product and its components. We also include the most recent labor market data and the summary of activity in credit markets. The final section summarizes the features of industrial production and inflation.

As always we welcome any suggestions for additional data that you would like to see and suggestions for how to improve the presentation of the data. Click here to go to the latest snapshot in one pdf document. Or, read on–

Lackluster GDP Growth

This morning’s advance estimate for GDP for the first quarter of 2012 reveals annual growth of 2.2%. After a 3.0% annualized growth rate in the fourth quarter, expectations were in the 2.2 to 2.5% range. The biggest contributors to the increase were personal consumption expenditures (PCE), up 2.9% at an annual rate, contributing about 2.0 percentage points to the overall increase. Durable goods consumption increased 15.3%, the second consecutive quarter of double-digit growth, and contributed 1.13 percentage points to the overall increase. Residential structures investment also has seen double-digit increases in consecutive quarters, up 19.1% this quarter after increasing 11.6% in the previous quarter. Nonresidential structures, -12.0%, and government, -3.0%, were the only negatives to be found, see BEA’s Table 1 for details.

Continue reading “Snapshot – 2012 Q1 GDP (Advance Estimate)” →

Welcome to the Cooley-Rupert Economic Snapshot, our view of the current economic environment. This is the latest version of our snapshot of the U.S. Economy based on the new employment numbers released today by the Bureau of Labor Statistics. The complete Snapshot based on the latest revisions to fourth quarter GDP from the Bureau of Economic Analysis can be found in our previous post.

As in all of our snapshots we present the data in a way that we find particularly useful for assessing where we are in the business cycle and tracking the U.S. economic recovery. The paths of all the series presented are plotted relative to their value at the peak of the respective business cycles. We use the business cycle dates identified by the National Bureau of Economic Research.

You can also find the most recent version of the entire snapshot in pdf form here. As always we welcome any suggestions for additional data that you would like to see and suggestions for how to improve the presentation of the data.

Welcome to the Cooley-Rupert Economic Snapshot, our view of the current economic environment. This is the latest version of our snapshot of the U.S. Economy based on the final revisions to fourth quarter data on National Income and Product from the Bureau of Economic Analysis. As in previous snapshots we present the data in a way that we find particularly useful for assessing where we are in the business cycle and tracking the U.S. economic recovery. The paths of all the series presented are plotted relative to the their value at the peak of the respective business cycles. We use the business cycle dates identified by the National Bureau of Economic Research.

We present the data in four sections. The first summarizes the path of Gross Domestic Product and its components. This post primarily updates GDP and its components based on preliminary estimates of fourth quarter activity from the BEA. We also include the most recent labor market data and the summary of activity in credit markets. The final section summarizes the features of industrial production and inflation.

As always we welcome any suggestions for additional data that you would like to see and suggestions for how to improve the presentation of the data. Click here to go to the latest snapshot in one pdf document. Or, read on

Final Fourth Quarter GDP Revisions

The third and final estimate of GDP and its components confirms that real GDP grew at an annual rate of 3% in the fourth quarter of 2011. While there was no change in the total, there were changes to the components of GDP that roughly offset each other. Personal consumption expenditures on goods were revised up further from 4.9% to 5.4% annual growth. Growth in services, however, was revised down further from 0.7% to 0.4% and continues to drag down growth in total consumption. It remains at least 5 percentage points below where its path should be compared to “typical” previous cycles and is showing signs of slowing down. Gross private investment was revised upward to 22.1% from 20.6%. Notably, growth in nonresidential structures was revised up to -0.9% from -2.6% in the ‘second’ estimate and -7.2% in the preliminary estimate.

Continue reading “Update: Final Revisions to Fourth Quarter GDP” →