On Friday the Commerce Department reported that first quarter annualized GDP growth was 2.2% down 0.8 of a percentage point from the previous quarter which was a paltry 3%. Keep in mind the 2.2% was merely the first cut at the numbers, generally the Commerce Will issue one or two revisions (downward) as more information becomes available.
The reported growth not only represents a possible slowdown, it indicates the economy is not growing fast enough to cut down the unemployment rate (which generally requires 2.5% annual growth).
Today more bad news was released as we learned consumer spending in March slowed down, business activity in at least one area of the country dropped off significantly, and hiring by small businesses slowed also.
The U.S. recovery had already slowed substantially in the first quarter as businesses cut back on investment and restocked shelves at a slower pace, data on Friday showed. Gross domestic product expanded at a 2.2 percent annual rate in the first three months of the year compared to 3 percent in the fourth quarter.
Stronger consumer spending cushioned the blow, but Monday’s data suggested consumers ended the quarter spending less freely.
And In the Mid West:
The ISM-Chicago index for the Midwest, which is based on a survey of both factories and service businesses, fell to 56.2 in April, its lowest level since November 2009.
It was the second consecutive monthly decline, although the gauge stayed above the 50 level that separates growth from contraction.
The reading follows several regional manufacturing surveys that have also suggested the economy started the second quarter on a soft note.
If those reports weren’t depressing enough, another study released today reports small business hiring has gone into the tank:
Businesses added 40,000 new jobs, a step back from the 75,000 positions created in March, according to Intuit, a payrolls processing firm. The average workweek for small business employees dipped 0.14 percent.
The pull back in hiring by small businesses is the latest indication that job growth is losing some momentum. Nonfarm employment increased 120,000 in March, the least amount in five months, with the jobless rate dropping to 8.2 percent — largely as some unemployed people gave up the search for work.
One of the reasons for the slowdown may be the recent spike in the price of oil, every recession we have had since the mid-1970s was been set off by a spike in oil prices.
Economist Jeffrey Rubin said in 2008:
Curiously, an over-500% increase in the real price of oil gets virtually ignored as a culprit behind today’s economy, eclipsed by the ongoing crisis in financial markets. Yet the run-up in real oil prices this cycle is over twice the spike in oil prices that occurred during the first or second OPEC oil shock. And those oil shocks produced two of the deepest recessions in the entire post-war period, including the 1980-82 double dip.
The price of oil influences more than just how you heat your house or drive your car. Since most manufacturing uses oil in at least some of their manufacturing process, even if it just to get product to the market. What may end up being similar to 2008 is that people will have to choice between bank payments and basic staple items whose costs were driven up by their energy costs.
A recent Harris poll proves the point:
According to a new Harris Poll, over half of Americans who own a vehicle (55%) say they have cut back on products and/or services in order to pay for the increased price of gasoline. As might be expected, those with lower household incomes are more impacted. Two-thirds (67%) of those with a household income of less than $35,000 a year have cut back on products or services because of higher gas prices compared to 37% of those who have a household income of $100,000 or more.
"What products or services have you cut back on?" Base: Cut back on products or services Total % Dining Out 75
Driving in general 73 Entertainment 65 Weekend trips/day trips 65 Reducing extras, such as luxury items 62 Vacations 59 Clothing 55 Movies 54 Groceries 38 Personal grooming, such as haircuts or manicures 37 Auto repairs/upkeep 24 Something else 11 Note: Multiple responses allowed.
With the President’s
policy of thwarting new drilling on government lands, don’t look for
things to get better before January 2013.