After a nightmarish fourth quarter of 2012, during which the economy was at first thought to have contracted to a tiny extent but finally eked out dismal annualized growth of 0.4 percent after revisions, President Barack Obama and his administration appeared to believe that they would have something to crow about when Friday’s report on first-quarter growth went public.
Too bad, so sad, guys.
Early that morning over at the Associated Press, aka the Administration’s Press, lead apparatchik Martin Crutsinger, informally nominated as the nation’s “Worst Economics Writer” by National Review’s Kevin Williamson (he could have added “by miles”), could hardly wait for 8:30 to arrive:
U.S. economic growth likely accelerated from January through March from a near-stall at the end of 2012, propelled by a revival in housing, steady consumer spending and increased stockpiling by businesses.
… Economists predict that the overall economy grew at an annual rate of 3.1 percent in the January-March quarter…
… A 3.1 percent growth rate would match the robust pace of the July-September quarter last year.
Really, this is the same guy who in 1987 characterized current and projected economic growth of between 2 percent and 3 percent as “weak.” In Marty’s 2013 world, anticipated growth only one-tenth of a point higher is now “robust.” It’s more than a little obvious that Crutsinger’s characterizations heavily depend on which party occupies the White House.
It must have been painful once Crutsinger or one of his AP coworkers disappeared into a government-administered lock-up room where a few privileged media organizations get 30-60 minutes of advance access I believe they shouldn’t have to information otherwise embargoed from release. It turns out that the first estimate of first-quarter growth in gross domestic product (GDP) from Uncle Sam’s Bureau of Economic Analysis was only an annualized 2.5 percent. Contrarian blog Zero Hedge noted that this was the biggest miss against analysts’ expectations since September 2011.
Well, 2.5 percent is a lot better than 0.4, right? Not really in this instance. The administration and its press acolytes tried to wave off the horrid fourth quarter as being caused by one-time items such as a sharp reduction in business inventories, and promised that things would even out with a big turnaround in early 2013. The average of the past two quarters is a paltry 1.45 percent. Big whoop.
The first-quarter expansion which did occur was driven primarily by a higher-than-expected 3.2 percent increase in personal consumption expenditures, which made up 2.24 points, or almost 90 percent, of reported growth. Given the drop in March retail sales and flagging consumer confidence, this GDP element seems overstated and likely to be revised down in May and June. Business investment beyond the inventory build-up only added .23 points to GDP growth.
It is true that about 40 percent, or 1.03 points, of the first-quarter gain was indeed due to inventory building. But the closer you look, the more troubling it gets. An astonishing and hugely disproportionate three-quarters of that inventory change — 0.78 points — occurred in farm inventories, a sector that is less than one percent of the entire economy. That’s by far this item’s largest contribution to GDP going back to at least 2004, and is enough to make one wonder how much crop value is rotting in the nation’s fields and warehouses. Imports also grew by much more than exports, subtracting a half-point from GDP.
Over at the president’s Council of Economic Advisers, Chairman Alan Krueger apparently imbibed a double-shot of the White House Kool-Aid delivered that morning, asserting that Friday’s result “provides further evidence that the economy is moving forward in the right direction.”
Most of the press wasn’t fooled. CNN’s email alert, Bloomberg News, and Reuters all accurately pronounced the result “disappointing.” The stock market tacitly agreed by declining in reaction to the news. Even AP reporter Steve Rothwell, who may have booked himself a date at the wire service’s woodshed, in a report headlined “Stocks Stall on Tepid U.S. Economic Growth,” wrote: “The shortfall reinforced the perception that the economy is grinding, rather than charging, ahead.” Rothwell further claimed that the first quarter’s figure may very well be as good as it gets: “Many economists see growth slowing to an annual rate of around 2 percent a year for the rest of the year.”
None of this fazed Crutsinger and his afternoon padawan Christopher Rugaber, each of whom apparently had what Krueger was drinking, from pretending that all is still well:
After nearly stalling in late 2012, the American economy quickened its pace early this year despite deep government cutbacks. The strongest consumer spending in two years fueled a 2.5 percent annual growth rate in the January-March quarter.
Ah yes, the “deep cutbacks” excuse. Unfortunately for the AP pair, after adjusting for $29 billion in TARP-related non-cash accounting entries in the current quarter, federal government spending of $917 billion was almost 1 percent higher than last year’s final quarter. The AP pair also managed to find one of the very few people who actually think the economy will get better during the rest of the year, “supported by improved household finances, pent-up demand for autos and the ongoing recovery in housing.”
Rugaber went out on a shaky limb of his own several weeks ago when he wrote: “Gone are the fears that the economy could fall into another recession.” If he’s not nervous yet, he should be.
Demonstrating that he can’t even keep his play-calling straight within the same business day, Crutsinger, with his cohort’s help, admitted that 3.1 percent growth really isn’t “robust” in the current circumstances:
In a healthy economy, with an unemployment rate between 5 percent and 6 percent, GDP growth of 2.5 percent or 3 percent would be considered solid. But in today’s still-struggling recovery, with unemployment at 7.6 percent, the economy needs faster growth to generate enough jobs to quickly shrink unemployment.
We haven’t seen 6 percent or lower unemployment since late 2008, so it’s pretty obvious that the economy needs to be growing a lot faster than the 3 percent cited for its performance to be considered “robust.”
We won’t get to that level of unemployment, which was considered insufferable a scant five years ago, as long as Obama and his administration continue to pursue Keynesian stimulus which hasn’t stimulated anything except rampant cronyism and general misery, unprecedented deficit spending, regulatory tyranny, and statist health care. Even if we somehow get there, it will be, thanks to ObamaCare, on the backs of millions of part-time workers who would prefer to be full-timers.
Sadly, there are two things we can count on for the foreseeable future. First, that the Obama administration will act as if the economy is meaningfully improving, when it isn’t. And second, that Crutsinger, Rugaber, and most of the AP’s other economics writers will continue to parrot the White House’s talking points.
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