Professor Mark J. Perry's Blog for Economics and Finance
One of highlights of today's BEA report on GDP is that real personal consumption expenditures increased 3.6% in the first quarter, which is the largest quarterly growth in consumer spending since the 3.7% growth in the first quarter of 2007 (see chart above). It's also the first time since 2007 of three consecutive quarters of positive growth in consumer spending, and is above the 3.05% average growth rate since 1980. This rebound in consumer spending starting in the third quarter of 2009 provides further evidence that the recession ended last July, and we are now ten months into an economic expansion that is gaining strength and momentum with almost every new economic report.
10 Comments: At 4/30/2010 8:48 AM, PeakTrader said...1st Quarter GDP Is Not A V-ShapeApril 30, 2010 "Real final sales of domestic product "” GDP less change in private inventories "” increased 1.6 percent in the first quarter, compared with an increase of 1.7 percent in the fourth."
At 4/30/2010 9:17 AM, morganovich said...GDP growth is going to slow appreciably in the next couple of quarters.Q1 was the last easy YOY comp.http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=2005&LastYear=2010&3Place=N&Update=Update&JavaBox=no#MidGDP is still at an absolute level somewhat below Q1 2006. in real terms, it's well below it. % changes are all well and good, but we live in the absolute economy, and this recovery is very tepid after such a sharp drop.the recovery in 2003 was hardly a barn burner, but it was better in % terms than this one and after a much smaller decline.this recovery is weaker than 2003.that's going to get really obvious in the next couple quarters as the YOY comps get harder.q1 2009 was the bottom with -6.4% GDP. q2 was much better with -0.7%.this makes the % comps much harder.the fact that growth from q4 to q1 slowed despite an easier comp (-6.4 vs -5.4) is a very ominous sign.
At 4/30/2010 9:50 AM, PeakTrader said...Biden Predicts Job Growth "” but Where's the Evidence? 28 April 2010 Vice President Joe Biden predicted job growth of 250,000 to 500,000 jobs a month in the next two months, according to CNBC on Monday.Biden claimed that the new jobs will be "because of good planning." Moody's Economy.com forecasted...new jobs to be created this year at an anemic fourth-tenths of one percent. With a workforce of about 135 million, Moody's forecast translates to 540,000 new jobs for the year, or about 45,000 new jobs a month.The National Federation for Business Economics reported that 73 precent of respondents to the April Survey said that "the fiscal stimulus enacted in February, 2009 has had no impact on employment to date." And nearly seven out of 10 surveyed believe that "a jobs bill such as the one recently enacted into law will have no impact on payrolls.""There are now 22.5 million government employees in the U.S"¦.one in every six jobs in the U.S. is a government job. But what the government workers produce, build or sell is nothing at all.William Dunkelberg, NFIB's chief economist, was surprised by the unexpected decline, saying: "Usually we see the small businesses leading the way out [of the recession] since they're the first ones to see the consumer come back, but what's happened this time is the customer didn't come back.""Since small firms produce half the private sector GDP, it is hard to envision a sustained recovery [and new hiring] without their participation. Once the gains from inventory rebuilding are exhausted, it is hard to see what will fuel growth. Small firm capital spending is at 35 year low levels and plans for future expenditures are equally low."David Stockman, President Reagan's budget director, also argues that the job market is not going to recover any time soon. His careful and detailed analysis of the current state of the economy points out that the economy's "core private sector income" dropped an amazing 6.2 per cent since the third quarter of 2008. He writes, "Quite simply, there's never been a sustained drop in private sector money incomes of any magnitude "” let alone 6 per cent "” during modern economic history."Consequently, job gains from purely cyclical recalls are likely to be modest in scale, and generally not at all commensurate with the [administration's] recovery scenario. The problem is one of pure math. There's simply little prospect of sufficient strength in final demand to trigger a rapid or extensive recall of the cyclically unemployed. It will be a slow slog.
At 4/30/2010 10:53 AM, juandos said..."but Where's the Evidence?"...Maybe we'll see an IRS jobs expansion?
At 4/30/2010 11:09 AM, gettingrational said...I hope that consumption increases are based on increased income and not more consumer debt. Income > Consumption Exports > ImportsJob Growth > Job DestructionU.S. Productivity > Competitors
At 4/30/2010 11:40 AM, Benjamin said...Each recession is like having the flu...when you have it, it seems like you are going to die, and never get better. Then sunny days come and it seems like you will never get sick again. There is an old joke in certain social service circles, to the effect that "when you feel like killing yourself is a terrible time to commit suicide." In a recession is a terrible time to make long-term economic predictions. Some people here still have recession-itis. Dudes, it's over. We are growing. People are resourceful, and want money. Worker productivity keeps rising. Crop yields go up every year, not down. We still have our infrastructure, our factories, our R&D facilities etc.etc etc. MBA's are getting minted every year.I will concede, declines in economic output, due to the invisible force called "credit" are befuddling, and the major challenge for policy-makers ahead. Only severe droughts, material shortages, wars, earthquakes etc should result in declines in output. Perhaps Dr. Perry will put his sabbatical to good use at AEI, and devise a unified field theory for preventing declines in economic output due to credit debacles. Now, that would be a boon to mankind.
At 4/30/2010 12:06 PM, Paul said..."Biden claimed that the new jobs will be "because of good planning." Yeah, you and your boss at the top of the pyramid feeding us, the Great Unwashed. Thanks, Joe!
At 4/30/2010 1:08 PM, Ron H. said...>"Perhaps Dr. Perry will put his sabbatical to good use at AEI, and devise a unified field theory for preventing declines in economic output due to credit debacles."Such theories already exist. See here and here.
At 4/30/2010 1:16 PM, Ron H. said...>"Vice President Joe Biden predicted job growth of 250,000 to 500,000 jobs a month in the next two months, according to CNBC on Monday.Biden claimed that the new jobs will be "because of good planning."Biden? LOL! I hope someone makes it a point to ask him about this in six months. Of course, maybe he knows something about planned government hiring that we aren't yet privy to.
At 4/30/2010 1:31 PM, Benjamin said...Ron H--While I would like to see a Ron Paul candidacy (I especially like his sentiments towards farm subsidies and other rural give-aways), I am not sure about the much ballyhooed "gold standard"--in fact, such sentiments strike me as medieval. Why gold? Not platinum? Silver? Diamonds? And what happens if man learns how to synthesize gold? Strict adherence to a gold standard could lead to steady deflation in dollar denominations of everything else, such as property. People are people, and watching the nominal value of your labor or property or stock portfolio decline could be unnerving. As is is, it is free country, and you can buy gold. You can then convert it into dollars and conduct transactions as you wish. Thus, you will put yourself on a mini-gold standard. Beware--those who bought gold in the mid-late 1980s are still down on their investment, after 25 years. Over time, gold can be a rotten investment. Right now, the Chinese and Indians are buying gold, with their new disposable income. The Fed's M2 is up 2 percent in the last year. Not sure there is anymore any connection between gold and the Fed. The Chinese money supply is up 22 percent in the last year and that is likely what is driving gold prices. Their economy is red-hot, growing at more than 10 percent a year. Guess who are the world's largest buyers of gold and diamonds? My guess is that investing in gold will become a self-fulfilling prophesy for a while--but it yields nothing, remember. At some point, it loses favor, and begins a long secular decline. I am still waiting for Dr. Perry to use his time wisely, and develop a sound financial system that will not turn credit debacles into Main St. nightmares.
Links to this post: See links to this post posted by @ if (typeof BL_addOnLoadEvent == 'function') { BL_addOnLoadEvent(function() { BL_writeBacklinks(); }); }About Me Name: Mark J. Perry Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Perry is currently on sabbatical from the University of Michigan and is a visitor at The American Enterprise Institute in Washington, D.C.
View my complete profile
Previous Posts Kick-Ass: Rail Freight Traffic Hits 16-Month High Markets In Everything: Obama Graduation Tickets Blog Review Brawlin’ in the Ukraine Parliament Market-Based Membership Approach to Healthcare At ... Chi. Fed Index: Another V-Shaped Recovery Sign Just One Word: Plastics Cartoon of the Day: This Says It All Chart of the Day: March Vehicle Sales Up 21% International Air Travel Increases Again in March var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10045229-2"); pageTracker._trackPageview(); } catch(err) {}1st Quarter GDP Is Not A V-ShapeApril 30, 2010 "Real final sales of domestic product "” GDP less change in private inventories "” increased 1.6 percent in the first quarter, compared with an increase of 1.7 percent in the fourth."
GDP growth is going to slow appreciably in the next couple of quarters.Q1 was the last easy YOY comp.http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=2005&LastYear=2010&3Place=N&Update=Update&JavaBox=no#MidGDP is still at an absolute level somewhat below Q1 2006. in real terms, it's well below it. % changes are all well and good, but we live in the absolute economy, and this recovery is very tepid after such a sharp drop.the recovery in 2003 was hardly a barn burner, but it was better in % terms than this one and after a much smaller decline.this recovery is weaker than 2003.that's going to get really obvious in the next couple quarters as the YOY comps get harder.q1 2009 was the bottom with -6.4% GDP. q2 was much better with -0.7%.this makes the % comps much harder.the fact that growth from q4 to q1 slowed despite an easier comp (-6.4 vs -5.4) is a very ominous sign.
Biden Predicts Job Growth "” but Where's the Evidence? 28 April 2010 Vice President Joe Biden predicted job growth of 250,000 to 500,000 jobs a month in the next two months, according to CNBC on Monday.Biden claimed that the new jobs will be "because of good planning." Moody's Economy.com forecasted...new jobs to be created this year at an anemic fourth-tenths of one percent. With a workforce of about 135 million, Moody's forecast translates to 540,000 new jobs for the year, or about 45,000 new jobs a month.The National Federation for Business Economics reported that 73 precent of respondents to the April Survey said that "the fiscal stimulus enacted in February, 2009 has had no impact on employment to date." And nearly seven out of 10 surveyed believe that "a jobs bill such as the one recently enacted into law will have no impact on payrolls.""There are now 22.5 million government employees in the U.S"¦.one in every six jobs in the U.S. is a government job. But what the government workers produce, build or sell is nothing at all.William Dunkelberg, NFIB's chief economist, was surprised by the unexpected decline, saying: "Usually we see the small businesses leading the way out [of the recession] since they're the first ones to see the consumer come back, but what's happened this time is the customer didn't come back.""Since small firms produce half the private sector GDP, it is hard to envision a sustained recovery [and new hiring] without their participation. Once the gains from inventory rebuilding are exhausted, it is hard to see what will fuel growth. Small firm capital spending is at 35 year low levels and plans for future expenditures are equally low."David Stockman, President Reagan's budget director, also argues that the job market is not going to recover any time soon. His careful and detailed analysis of the current state of the economy points out that the economy's "core private sector income" dropped an amazing 6.2 per cent since the third quarter of 2008. He writes, "Quite simply, there's never been a sustained drop in private sector money incomes of any magnitude "” let alone 6 per cent "” during modern economic history."Consequently, job gains from purely cyclical recalls are likely to be modest in scale, and generally not at all commensurate with the [administration's] recovery scenario. The problem is one of pure math. There's simply little prospect of sufficient strength in final demand to trigger a rapid or extensive recall of the cyclically unemployed. It will be a slow slog.
"but Where's the Evidence?"...Maybe we'll see an IRS jobs expansion?
I hope that consumption increases are based on increased income and not more consumer debt. Income > Consumption Exports > ImportsJob Growth > Job DestructionU.S. Productivity > Competitors
Each recession is like having the flu...when you have it, it seems like you are going to die, and never get better. Then sunny days come and it seems like you will never get sick again. There is an old joke in certain social service circles, to the effect that "when you feel like killing yourself is a terrible time to commit suicide." In a recession is a terrible time to make long-term economic predictions. Some people here still have recession-itis. Dudes, it's over. We are growing. People are resourceful, and want money. Worker productivity keeps rising. Crop yields go up every year, not down. We still have our infrastructure, our factories, our R&D facilities etc.etc etc. MBA's are getting minted every year.I will concede, declines in economic output, due to the invisible force called "credit" are befuddling, and the major challenge for policy-makers ahead. Only severe droughts, material shortages, wars, earthquakes etc should result in declines in output. Perhaps Dr. Perry will put his sabbatical to good use at AEI, and devise a unified field theory for preventing declines in economic output due to credit debacles. Now, that would be a boon to mankind.
"Biden claimed that the new jobs will be "because of good planning." Yeah, you and your boss at the top of the pyramid feeding us, the Great Unwashed. Thanks, Joe!
>"Perhaps Dr. Perry will put his sabbatical to good use at AEI, and devise a unified field theory for preventing declines in economic output due to credit debacles."Such theories already exist. See here and here.
>"Vice President Joe Biden predicted job growth of 250,000 to 500,000 jobs a month in the next two months, according to CNBC on Monday.Biden claimed that the new jobs will be "because of good planning."Biden? LOL! I hope someone makes it a point to ask him about this in six months. Of course, maybe he knows something about planned government hiring that we aren't yet privy to.
Ron H--While I would like to see a Ron Paul candidacy (I especially like his sentiments towards farm subsidies and other rural give-aways), I am not sure about the much ballyhooed "gold standard"--in fact, such sentiments strike me as medieval. Why gold? Not platinum? Silver? Diamonds? And what happens if man learns how to synthesize gold? Strict adherence to a gold standard could lead to steady deflation in dollar denominations of everything else, such as property. People are people, and watching the nominal value of your labor or property or stock portfolio decline could be unnerving. As is is, it is free country, and you can buy gold. You can then convert it into dollars and conduct transactions as you wish. Thus, you will put yourself on a mini-gold standard. Beware--those who bought gold in the mid-late 1980s are still down on their investment, after 25 years. Over time, gold can be a rotten investment. Right now, the Chinese and Indians are buying gold, with their new disposable income. The Fed's M2 is up 2 percent in the last year. Not sure there is anymore any connection between gold and the Fed. The Chinese money supply is up 22 percent in the last year and that is likely what is driving gold prices. Their economy is red-hot, growing at more than 10 percent a year. Guess who are the world's largest buyers of gold and diamonds? My guess is that investing in gold will become a self-fulfilling prophesy for a while--but it yields nothing, remember. At some point, it loses favor, and begins a long secular decline. I am still waiting for Dr. Perry to use his time wisely, and develop a sound financial system that will not turn credit debacles into Main St. nightmares.
About Me Name: Mark J. Perry Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Perry is currently on sabbatical from the University of Michigan and is a visitor at The American Enterprise Institute in Washington, D.C.
View my complete profile
Previous Posts Kick-Ass: Rail Freight Traffic Hits 16-Month High Markets In Everything: Obama Graduation Tickets Blog Review Brawlin’ in the Ukraine Parliament Market-Based Membership Approach to Healthcare At ... Chi. Fed Index: Another V-Shaped Recovery Sign Just One Word: Plastics Cartoon of the Day: This Says It All Chart of the Day: March Vehicle Sales Up 21% International Air Travel Increases Again in March var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10045229-2"); pageTracker._trackPageview(); } catch(err) {}