U.S. economy still near stall speed
Submitted by gjohnsit on Fri, 07/29/2016 - 10:56am
The GDP report came out this morning, and it wasn't good.
The US economy grew by 1.2% in the second quarter, weaker than expected, according to an advance estimate released Friday.
Economists had forecast an improvement in growth from the first quarter to an annualized pace of 2.5%, according to Bloomberg.
Missing the estimate by more than 100% is like a batter swinging at a wild pitch that winds up in the stands. Their economic models are very, very wrong.
To make matters worse, the reason for the miss was because of forward-looking factors.
Private fixed investment fell at a 3.2% pace, the steepest drop in seven years, Bloomberg noted. Also, nonresidential fixed investment — on factories, machinery, and the like — fell for a third straight quarter, by 2.3%.
What's more, previous quarters were also revised.
First-quarter GDP growth was revised even lower to 0.8% from 1.1%.
What's really disturbing is what such slow growth means in a low unemployment environment.
"Over the past 12 months, the economy has expanded by only 1.2%," said Paul Ashworth, chief US economist at Capital Economics, in a note.
"What is really worrying is that pace has still been enough to reduce the unemployment rate further, suggesting that the economy’s potential growth rate could conceivably be close to zero," he said.
Comments
For the last two years
I've asked my "investment adviser" one question at our annual portfolio review:
Last year and this one he spluttered and stalled, muttering about the virtues of buy and hold and the impossibility of timing the markets. Both times I've instructed him to increase my cash equivalent investments by 25% of the total portfolio. I'm now 60% in money markets. Did the same thing in 2006 and early 2007, and have never regretted it.
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I too survived
the Great Bush Global Collapse. Like you, my money was in money markets and I actually earned a little bit in the collapse.
Neither Russia nor China is our enemy.
Neither Iran nor Venezuela are threatening America.
Cuba is a dead horse, stop beating it.
Forgive my ignorance, but can you be more specific?
Weren't mortgage backed securities money markets?
No
"Money markets" are ultra-short bond funds, which are the investment equivalents of a savings account. Very low yield, but very low price volatility. It's basically parking money in cash.
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Money markets
Money market funds are generally very short-term corporate credit instruments, as I understand it.
Mortgage-backed securities/bonds are what they sound like.
Money market funds can also be based on municipal bonds
which makes the dividends tax exempt from the IRS
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
A buy and hold investment advisor
should be put out of his misery or shot. Same thing.
The guys I followed on an employer specific 401k newsletter since about 2002 are firmly dedicated to capital preservation. That suits me very well since the vast majority of my liquid assets are tax advantaged retirement funds. They saved my ass from every recession after Shrub's first one. I finally turned over the keys to them a year ago by transferring my 401k and non-tax advantaged brokerage account into a managed IRA. They're a fiduciary and I feel they have my back. It's been a tough year but I've done well enough with them despite a small but not insignificant management fee. I've had some interesting conversations where my viewpoint meets their market driven thinking. They listen well and we seem to be a good fit. The first suggestion to buy and hold anything would be the very last words I heard from them.
"Ah, but I was so much older then, I'm younger than that now..."
Oops!
the "October Surprise" just may turn out
to be economic.
In May '08, I saw a top Dem
In May '08, I saw a top Dem strategist on C-Span say 'can't run on the Economy because it is so strong.' Thinking maybe to become a Very Serious Person you have to start out with some years of OK intimate living with ostriches. 'There's a slow train coming / up around the bend"
Orwell: Where's the omelette?
'OK' didn't belong there.
'OK' didn't belong there.
Orwell: Where's the omelette?
Bad News is Good News
Monopoly capital suffers from a chronic lack of investment
opportunities and excessive productive capacity. Stagnation, or slow growth in polite econospeak, is a feature of the system. Of course shocks to the system often bring short term gains, but year over year, decade over decade, stagnation is the norm. Another symptom is the financialization of the global capital system which is almost wholly unproductive but starts out being profit generating.
This "recovery" is one of the longest on record. The "..." are for the lack of good paying, middle class supporting, jobs. When the monthly employment/unemployment/labor market participation data are released, it's important to look at the type and quality of jobs that were added or lost that particular month. Most of this long recovery has featured low paying, insecure, jobs and less adult participation in the statistic-generating economy.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
squeezing blood from a turnip
Perfect example of the power of stupid greed by the Billionaire class.
The American people have no money. And the Oligarchs cannot figure out why the serfs are not spending.
They really need a "duh" moment.
Neither Russia nor China is our enemy.
Neither Iran nor Venezuela are threatening America.
Cuba is a dead horse, stop beating it.
According to a Federal Reserve survey, 47% of Americans
cannot come up with $400 to pay for an emergency. The wage earners are, by and large, only eking by.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
That just makes them ripe for payday lenders and
car title loans. Investment opportunity!!!!
This is why our system is so very screwed up.
"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"
Payday Lenders: There are more of these storefronts than
McDonalds and Starbucks outlets combined. That tells me a lot about the state of the economy and particularly Obama's handling of the post crash recovery.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
Did Bernie really thank O and B for the economy? WTF?
A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.
We've lost about a year's worth of GDP
If you look at the picture over the last decade and extrapolate the GDP in 2006 based on the GDP growth and then compare the actual GDP since then you find that more than one year's GDP is missing in the area between the two curves. This will never be made up and it is improbable that we will not have another recession soon. Average GDP growth of 1% over the last three quarters is a bad sign. Pre 2007 we were seeing 3-3.5% running averages in GDP growth. Since the very weak Obama recovery we have seen closer to 1.75% running averages. That makes it impossible to ever catch up.
The pernicious part about hyping our great recover is that it hides the fact that it is a drastically insufficient recovery to catch up. We need to do something about it, but touting .lousy statistics will guarantee four more years of the same, and probably much worse with the next recession. This all results in lost wages, lost good-paying jobs, decimation of the middle class, increase in poverty, especially childhood poverty, and a huge economic stress on the population. It also helps accelerate the transition to China as the dominant power in the 21st century.
Capitalism has always been the rule of the people by the oligarchs. You only have two choices, eliminate them or restrict their power.
Good points. The 99% is not meant to catch up. We are meant
to be kept in a state of being job-scared and be bombarded with tales about how "they" (they being someone not in your group) are taking the good jobs.
There are few good jobs, in the post WW2 sense, being created. There's plenty of work in the prole-hole but don't try to live a life of liberty and the pursuit of happiness.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
Re:
Karl Marx had a few words to say about this.
He called it the "reserve army of unemployed workers".
Yes Uncle Whiskers surely did. He also informed us on about how
labor adds value even as its being marginalized and beaten down by capital.
When you hear Krugman and other neoclassical economists talk about the "natural rate of unemployment" these academicians, and those in the employ of capitalist enterprises, are really saying is what's the least number of unemployed that a society can have and not have meaningful pressure to raise wages and give workers power in the workplace?
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
We have an evolutionary economy
The way I think of it, there is an almost evolutionary tilt to the economy.
The rich want to pass on their wealth and advantages to the next generation, and deny wealth and other advantages others.
That is why they have no problem privatizing schools, plundering pensions and driving health care costs through the roof. High unemployment and deteriorating infrastructure is a plus, not a problem to overcome. Wealth disparity bakes in their kids advantages.
It is very important to them that their progeny do not compete on a level field.
Regarding the Great Recession: Henry Ford said times aren't bad
if you've got money.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
Once again great reporting- thank you
This is the type of unbiased information that I enjoy seeing and reading (that is why I am a member of this community). It helps me understand the Truth of what is going on in the world. Thank you for putting in the time and effort into it. Even thought it ain't pretty it is real.
This.
.
Is a big part of the reason for this is that factories do not have to invest in the business for tax purposes because now they can park the money out of the country??
I take it to mean
simply that they aren't investing in future production.
No kidding! Who's gonna buy future production with no
jobs or money?
"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"
As predicted, there is excess production capacity so it makes no
sense for corporations to build more productive capacity. This is what happens in a stagnant economy.
In a rational economy, there would be sufficient demand for productive investment.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
What's the point of investing in business if you are maxed out
on customers? When will they realize they have to give raises before they'll see rising demand?
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I think it's an internal contradiction endemic to the system and
will bring the system down after mass suffering. Those who control the political economy will not cede an iota of power with being forced to.
"The justness of individual land right is not justifiable to those to whom the land by right of first claim collectively belonged"
The Bankers do not have enough fingers to plug the dikes.
Market upsurges are nothing but profits shown upon speculation. Stock prices are artificially inflated then the profits reaped. Even a pothead knows when his bag has been pinched. (nothing against potheads)
"I can't understand why people are frightened of new ideas. I'm frightened of the old ones."
John Cage
Yeah
In 1934 the economy grew 11%, in 1935 9%, in 1936 13.9%. That's a recovery.
Whats funny (or not) is that the Social Security trust fund needs GDP growth of about 2.9% to be good thru 2090. The days of strong economic growth are gone without plentiful cheap energy, resources, growing work force. Growth of 3%- 3.5% is about all any economists would expect in the coming decade.
The coming renewable energy boom will allow the economy to stretch its legs. If we save the planet and become a space faring race, space based resources will spur even more economic growth.
FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.
Paul Ashworth, another economist moron
Wonder which corporatist is paying his salary?
"You see, our economic doom is not the fault of the greed of the 1%. It's the fault of the hard work of the 99%, who went ahead when we told them to go get jobs and got jobs and stuff."
Except: The official unemployment rate does not reflect true unemployment, it reflects those actively looking for work. Official unemployment is down because so many have found it hopeless and given up. There are plenty of people who would LOVE to have jobs! Build hope and they will come.
But wait. No, forget all that. The 1% is always right. USA! USA!
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As Snark, Ashworth's comment is a Boojum
As an attempt to describe reality, it is nonsense.
There is no justice. There can be no peace.
Speaking of economic growth
If consumer spending is all there is...