By now I’m sure you’ve read several analyses elsewhere of this morning’s GDP report. I have no desire to duplicate those analyses, but wanted to add a few points relevant to what this means to everyman and everywoman.
1. This is just a preliminary estimate. In two months we could find out it was actually 1% or actually 3%. And there will be even more revisions in a year or two.
2. Assuming the final result is close to this estimate, we have an economy that grew enough in the first quarter to consistently add jobs – so this confirms that payrolls reports from January through March.
3. What “socialism?” Government spending actually subtracted from the result. Nice to know that government austerity … oh, never mind.
4. Residential investment added to the growth. This is more confirmation that the housing bust has already bottomed. This is very good for the longer term, since residential construction is one of the premier long leading indicators of the economy.
5. Median wage growth in the first quarter was +0.5%. For the last year, median wages have only grown 1.7%. You simply cannot sustain a consumer economy for too long on this kind of paltry growth.
So the verdict is, Ok but not nearly good enough, which pretty much summarizes this recovery which is getting close to 3 years old.
In passing, despite the Pied Piper of Doom’s vile description of Bonddad as an apologist for the “status quo,” the fact is Bonddad and I called for the creation of a new WPA almost exactly 3 years ago, and we’ve both called for massive spending programs funded by long term bonds (currently priced at 2% yields) to bring the US’s failing infrastructure into the 21st century. Imagine where we’d be now if that had happened. Sigh. Oh, well.
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