GDP Numbers Paint Grim Picture

Real GDP Growth: 2007-2011, BEA 7/29/2011

The U.S. Department of Commerce through the Bureau of Economic Analysis (BEA) released updated GDP figures today.

This month’s report is especially important because it contains annual revised figures covering the period from 2007 to present. The changes aren’t good.

This news will be completely downplayed and drowned out by the debt ceiling melodrama being played out in Washington DC.

But make no mistake about it… this news is far, far more important to your future than today’s squabbling over two nearly identical debt ceiling plans that do nothing to fix the problem.

You can be 100% certain of this much… our nation’s creditors, investors, the credit bureaus and economists will perk up and take notice.

Revised Estimates: 2007 through First Quarter 2011

Some BEA Report figures that stand out:

  • Real GDP from 2007-2010 shrank at an annual rate of 0.3%
  • Real disposable personal income revised downward by 0.6%
  • Consumer price index revised upward 0.2%
  • Q1 2011 GDP growth revised downward to 0.4%
  • Q2 2011 GDP growth reported at 1.3%

So what do these things mean? Why does it matter?

The Economy Has Not Recovered!

The long-term unemployed don’t need to be told this by a government report, but probably the most devastating news is that the Real GDP growth figures for 2007 through 2010 were revised down.

The Real GDP SHRANK at an annualized average rate of 0.3%.

Previously, it had been reported that the Real GDP had grown by an average rate of 0.1% since 2007 and had attained an all-time high again. It signaled that the Great Recession was over.

Now we know that is not true. The national economy is still contracted. It has not returned to its Q2 2007 high. The psychological boost from thinking the Real GDP had achieved an all-time high was yanked right out from under us like a bad joke.

That means we are FOUR YEARS into the Great Recession and it isn’t over yet.

Other Bad News

Real disposable income figures for the same period since 2007 were revise DOWN by 0.6% annually.

The consumer price index for the same period since 2007 was revised UP by 0.2% annually.

That means since 2007 consumers have had even less money to spend than previously thought while at the same time things cost them even more!

That is a double whammy against consumers and spending.

No wonder unemployment remains high and the economy is in a terrible funk.

Real GDP Growth in Q1 2011 Pathetic

And we finally come to the here and now part of the report. The first quarter Real GDP growth for Q1 2011 was revised DOWN to a seriously anemic growth rate of just 0.4%.

Real GDP Q1 growth had previously been report at a slow but cautiously optimistic rate of 1.9%.

That got blasted all to pieces in this new report. You can kiss that optimism goodbye.

Lastly, the brand spanking newest preliminary number, the Real GDP growth rate for Q2 2011, came in at a mediocre 1.3%.

No matter how you cut the mustard, this new Q2 preliminary Real GDP growth rate is bad. It looks like 2011 is gonna be another lost year.

Preliminary Q2 isn’t even as good as preliminary Q1 was before that evaporated.

Looks like we are poised for a double-dip recession.

No matter where you look… unemployment, income, the consumer price index, GDP growth or government spending… there isn’t anything that can make anyone optimistic about the future.

The Bottom Line

The gruesome GDP numbers will not improve until jobs return and unemployment goes down.

The private sector is waiting on pins and needles to see how the government is going to affect their bottom line through taxation before they get serious about investing. They’ve been waiting since Barack Obama got elected President.

The government doesn’t have a jobs creation plan. 

The last economic recovery plan government tried didn’t work at all. At a cost of $471,000/job the “stimulus” package from two years ago was a total bust.

The vast majority of the 561,000 jobs “created or saved” by the stimulus were “saved” teacher jobs. How many teachers do you know that make $471K/yr?

And the “saved” teacher jobs were only saved temporarily. This year, now that “stimulus” funds are exhausted, teachers all over the country are being laid off in droves.

And the money isn’t there to pay for another government job creation plan even if one existed. Taxpayers simply can’t afford to pay trillions more for new programs that cost $450,000 to $500,000 PER TEMPORARY JOB!

Conclusions

More jobs and revenues generated from more jobs that could course correct the gruesome GDP indicators will never come back until we get our nation’s economic house in order.

We will never get our economic house in order until we get serious about our debt.

Neither the Boehner Plan nor the Reid Plan come remotely close to doing that.

And therein lies our conundrum!

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Jul 29, 2011, in Debt, Deficit, Economy, GDP, National Debt, Politics. Bookmark the permalink. 2 Comments.

  1. Excellent work, AZ. This should be headline news everywhere; but, as you say, the debt ceiling will drown it out. I will try to link your article in the next few days. In spite of every thing else, people need to be aware of this. The Great recession never ended. Many of us have intuitively known this all along and the now we have the facts. Thanks so much for writing this post.
    BTW, I have added “Inform The Pundits” to my blogroll. It was an oversight that I hadn’t done it weeks ago. My bad!

  2. I subscribe to the BEA’s mailing list so got the report sent to me early this morning. However, I really didn’t read it until I saw a story about it in the Wall Street Journal’s “Market Watch”.

    According to the WSJ, its the big drop to .4% GDP growth in Q1 and the discovery that GDP has not recovered back to 2007 highs as previously thought that spooks the markets most.

    I also read today that investors have started withdrawing funds from safe short-term investments backed by U.S. Treasury securities because of the debt ceiling crisis.

    The Treasury announced it would delay auctioning 3 and 6 month T-bills on Aug 1 if a deal is not reached.

    Both Moody’s and Standard and Poor’s said neither debt ceiling bill went far enough. Passage of either would not be enough to prevent a government credit downgrade.

    This stuff is getting very, VERY real.

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