The debt-ceiling game of chicken may have taken all the oxygen out of the room, but pay attention Friday when the government announces second-quarter gross domestic product. While GDP arguably misses many areas of critical economic performance, it remains a gold-standard metric. U.S. GDP growth slowed to only 1.9 percent in the first quarter. Nobody’s looking for a strong rebound for the second quarter — estimates range from 1.7 percent to 2 percent growth.
This matters on two pressing fronts. First, weak growth makes it more difficult for the economy to dig out of high debt, especially with the federal deficit and debt. Second, it makes it impossible to make significant gains against high unemployment. Three percent, better; 4 percent, now you’re talking. Below that, real gains in the labor force are impossible. Slow growth isn’t the only thing holding back hiring, but it’s a huge impediment.
Two quarters of weak GDP growth make for a dismal outlook in 2011. Most economic forecasts I’ve seen expected the second half to rebound to 3 percent growth. But the evidence for that happening is lacking.
Strong corporate profits are depending on international growth, not what’s happening at home. Consumer spending remains frail and gasoline prices are headed back up. State and local governments remain in crisis. And gridlock in Washington makes for uncertainty. Worse, severe federal cutbacks will nearly ensure even weaker growth. It all keeps the slow-growth feedback loop going. Were a sane Republican to run next year, add President Obama to the jobless rolls.
Today’s Econ Haiku:
A dot-com that lived
Thousands that didn’t make it
Nicely played, Bezos