TOM BLUMER: The Economy Has No Clothes: So they further define down the “new normal.”
On Friday, the government’s Bureau of Economic Analysis reported that the nation’s economy contracted at an annual rate of 0.7 percent during this year’s first quarter, a sharp drop from the barely positive 0.2 percent it estimated a month ago.
Ignoring for now the current absurd allegations that Friday’s reported decline overstates how bad things are because the BEA must not be properly performing its seasonal adjustment calculations — a matter I will address in my next column — I’m more than a little surprised that the contraction wasn’t worse.
Many key components of what the nation’s gross domestic product truly is — “the (real) value of the production of goods and services in the United States” — turned in seasonally adjusted first-quarter results far below those seen last summer and fall. In certain key instances, the first quarter of 2015 actually came in below the far more winter-ravaged first quarter of 2014, effectively reversing all of the growth occurring during the quarters in between. . . .
Many economists and analysts have revised their original estimates of second-quarter growth dramatically downward. As of May 26, the Atlanta Branch of the Federal Reserve, whose GDP model based on the data available in late April almost exactly nailed the government’s original positive 0.2 percent first-quarter growth estimate, projected that the second quarter will come in at an annualized 0.8 percent. As of Friday, even the incorrigible Keynesians at Moody’s were predicting only 1.5 percent.
You might expect that policymakers and pundits would be looking into why the economy continues to crawl along at subpar speed and occasionally contract, which has now happened three times since the recession’s official end. Dream on. In addition to the whining about seasonal adjustments noted earlier, they’re also declaring that the U.S. economy simply can’t grow any faster, no matter who’s in charge and no matter what their public policy prescriptions are.
Yeah, I don’t believe that.