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So here we are, coming to the end of another month with limited economic growth. Friday (August 26), the Commerce Department downgraded the second quarter US Gross Domestic Product (GDP) from 1.3% as initially reported to 1%. Via Reuters:
The rate of growth between April and June was cut from the government’s first reading of 1.3 percent and followed a lethargic 0.4 percent pace in the first three months of 2011.
This means the economy grew only 0.7 percent in the first half of the year. Nonetheless, and despite a sharp fall in consumer confidence this month, economists do not believe the economy will fall back into recession.
Note for those with short memories – the first quarter GDP was initially reported at 1.8%, upped to 1.9% with some fanfare before being downgraded to .4%. That seems to be a bit of a trend these past few weeks and months where the various economic indicators get revised in a negative direction (negative that is in relation to what would be good news). For example, when the Initial Unemployment Claims for last week came out on Thursday, the previous week’s claims were revised upwards (via CNN):
The number of first-time filers for unemployment benefits rose to 417,000 in the week ending Aug. 20, the Labor Department said Thursday. That’s up 5,000 from a revised 412,000 the prior week.
The original report for the previous week was at 408K so the upwards revision was 4K. Since the business reporters like to latch onto a factoid or two to try to explain things, they’ve all seemingly latched onto the point that some striking Verizon workers had filed claims. But the number provided was 8.5K which means even without the Verizon worker claims (which will most likely be denied as strikers are rarely allowed to collect unemployment), it would still have the initial claims at 408.5K. From the previously linked CNN article:
In most states, workers on strike are not eligible for unemployment benefits. And the weekly initial claims number merely reflects applications for the benefits — not all of which will be approved and paid out.
Today (Sunday, August 28), Bloomberg has an article on their survey of economists for the August jobs and economic numbers. Given the propensity for the economists to claim “surprise” when their predictions are way off, I’m not sure how much credence to give them, but at least the numbers do seem to reflect a bit more of the realities facing those millions of us among the long term un and underemployed:
Sustained increases of around 150,000 a month are needed to bring unemployment down about half a percentage point over a year, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “200,000 is the speed the economy needs to really cut into the jobless rate,” he said.
Through July, the economy had recovered about 1.94 million of the 8.75 million jobs lost as a result of the 18-month recession that ended in June 2009.
Over two years into the “recovery” and less than a quarter of the lost jobs from the Great Recession have been returned.
So while Christine Lagarde cautions political leaders against too much belt tightening, we see House Majority Leader Eric Cantor proclaiming that any hurricane or earthquake relief funds must be offset by other spending cuts.
Michele Bachmann shows her economic pandering bona fides by declaring that she can fix that economy in one quarter:
Representative Michele Bachmann promised Saturday that as president she would turn things around within one economic quarter, in part by cutting corporate taxes and eliminating capital gains and inheritance taxes. Painting President Obama as doggedly antibusiness, Mrs. Bachmann asked, “Why in the world wouldn’t we do what we know works to create jobs in this country?”
But on Saturday she ventured into less familiar territory, pointing to the example of Ireland: “There are over 600 American companies that have gone to Ireland because of the tax rate,” she said. “Over 100,000 jobs. I want those 100,000 jobs back in the United States.”
She called for a tax holiday for American companies on profits earned abroad, saying it is “the easiest thing the president could do, and he could do it today.”
“American companies have sitting in the bank over a trillion dollars,” Mrs. Bachmann said. “If we had a zero rate of repatriation, by the afternoon that trillion dollars would be back in the United States. Do you have any idea of how many jobs would be created?”
The idea of a tax holiday, which corporations have been lobbying for in Congress, is controversial. A nonpartisan study found that during a tax holiday in 2005, companies spent most of their savings to pay dividends to shareholders and to buy back stock, not for investments or new jobs.
For a so-called fiscal conservative, Bachmann’s proposals sure do seem to be of a nature that would starve the government of revenue with no corresponding increases in jobs. For the record, the Bush/Obama tax cuts and tax rates have now been in place for ten years, leading to one of the worst job creation records ever. Maybe Rep. Bachmann needs to go back for some remedial vocabulary work as her definition of “…what we know works…” is not matched by reality.
But hey! Tony Hayward has his life back so it’s all good, right?
And because I can:
Cross posted from Just A Small Town Country Boy