February 28, 2013

Are We in a Growth Recession?

February 28, 2013

Are We in a Growth Recession?




– 4thQ2012 GDP was revised from -0.1% to +0.1%.

– This is the second of three 4Q GDP readings. Third and final update is Mach 28.

The fact is that this data is terrible.  GDP was supported by low interest rates, expanded money supply, massive deficits, and a reduced Social Security payroll tax which is now gone.

We are 5 years in to a lost decade and most everyone is acting as if we are in a recovery.  +0.1% gain in GDP is not recovery.  We are in an extended growth recession.  A growth recession occurs when the economy is growing but at a pace much lower that historic trend. Since the “recovery” started these are the annualized quarterly growth rates in GDP for the past 14 quarters +0.1%, 3.09%, 1.26%, 1.97%, 4.10%, 1.28%, 2.48%, 0.08%, 2.39%, 2.60%, 2.24%, 2.33%, 4.03%, 1.46%.  Historic trend is 3.25% – 3.5%.

Jobless Claims (week ended 2/23/2013)

– New Claims  (seasonally adjusted) 344,000.  Previous revised to 366,000. – 4-week Moving Average (seasonally adjusted)  355,000.  Previous was 361,750 (revised). – New Claims (unadjusted) were 307,589.  That week included the President’s Day Holiday.

Chicago PMI  (February 2013)

– Business Barometer Index 56.8.  Previous was 55.6.

To see the disconnect between reporting and reality consider this: As I was writing this paragraph the Bloomberg web page had a “Breaking News” item “Consumer Comfort in U.S. Improves to Highest Level This Year.”  That is correct but 1) we are only 2 months into the year and 2) the reading is  minus 32.8.  This is Bloomberg’s own survey Index of Consumer Confidence.