Same old song, but Americans are having a hard time humming it. We know this from the GDP report released on Friday.
The Commerce Department reported that GDP grew at a rate of 2.2%for the first quarter of 2012. That’s down from 3% at the end of 2011 and less than the 2.6% rate economists had expected. This is not good news about the economy because it shows that an economic recovery may not be humming along as nicely as everybody had hoped.
Gross domestic product (GDP) is a measure of all goods and services produced by a country within a certain amount of time. It is the growth rate for the economy. For our nation’s economy to grow and recover from the recent recession, we need to increase GDP. For GDP to increase, we need jobs. With the unemployment rate at 8.2%, jobs is something we don’t have right now and we don’t know when we will be getting them. Nearly 8 million people lost their jobs in the recession, five million are still out of work. Ugh.
GDP is off because business investment is down. Businesses aren’t investing in plants and equipment, and they’re not hiring new employees. They’re keeping their finances in check until they are more confident about the country’s financial future. There’s also a bunch of tax increases coming at the end of the year. A big bah humbug for the holidays.
Guess who else isn’t spending? The government. Seems like good news? Well, here’s the problem. Washington spent, spent and spent over the last two years, flooding the economy with money, with a plan to slow spending when the economic recovery was in full swing. Sounds good, but the recovery never got that good, and the government spending stopped. (Talking about a good recovery, here’s a comparison I got today from today’s Wall Street Journal: The first 11 quarters of the Reagan expansion in the 1980s grew an average of 6.1%. Now that’s a good recovery.)
The GDP report did show that somebody’s spending. Consumer spending was up 2.9% for the quarter and investment in housing was up 19.1%
Bottom line, jobs and work are not four letter words. They are, but not that kind of four letter words. Wall Street and Main Street need to hear them used more often. Washington needs to change its tune; it would be music to everybody’s ears.
Heigh-ho, Heigh-ho, It’s off to work we go…
Peace Love Profits,