US Economy Has Best Quarter in Six Years: Grows 5.7%. Conservative Heads Explode
The U.S. Economy grew at a 5.7% clip in the 4th Quarter of 2009 as businesses cranked up investment and manufacturing and exports grew more than imports. This is the best quarter the economy has had since 2003.
Can there be any additional doubt that the stimulus bill did its job of arresting the precipitious economic decline that President Obama inherited from George W. Bush? Yes, I know that we haven't seen sustained job growth yet, but that is always the last thing to come out of an economic recovery. Conservative commentators who will still insist the stimulus was a failure because we haven't had job growth yet are like a guy who just got his wife pregnant three months ago wondering where the baby is.
Democrats need to be trumpeting this from the mountaintops. President Obama already has, now its our turn.
This could be the last hurrah for a long, long, time. That 5.7% is largely comprised of two things. Inventory rebuilding (which had sunk to very low levels), and stimulus crack. How else would you explain an increase in consumer expenditures while tax liabilities fell? Remember, there is no tax liability on most transfer payments (unemployment, welfare, etc...). The spending is not the result of wages.
Brace yourselves for the next wave of layoffs. This time in the public sector, as city, states, and counties face the reality of falling revenues and rising employment and pension costs. NYC is facing nearly 20,000 layoffs alone, as the state attempts to balance its budget.
Which state will go bankrupt first? I can't decide between California, Arizona, or Illinois.
Anybody who thinks we've turned the corner is either naive, or a fool.
Well, you'd better go over here and explain that to FiveThirtyEight.com, who in an excellent article examines each of the component parts of GDP = (C (consumer expenditures)+ I (investment)+ X (net exports)+ G (government expenditures)) and concludes "Overall this is a very encouraging report."
But I question the authority of the information. My first clue was a couple of typos a few paragraphs into the article ("ridicules" instead of "ridiculous" and "the" instead of "they").
My second clue was some unusual math. The article attributes 60% of the GDP growth to inventory and 70% to PCEs. It's hard to tell if there is overlap in these two numbers. If so, that would account for the "extra" 30%, but the author didn't explain.
I also noticed that the article claims software growth as a good thing. While I agree that this is good, I also see this as inventory replacement, companies spending money where they have neglected for several quarters. This part of the increase is not likely to be repeated.
I'm very bullish on the economy and this article brought out some good points. But if you only look at that side of the issue, you miss a lot of detail. Don't drink the kool-aid.