The news media were ecstatic when the government said in January that the economy grew by 3.2 percent in the final three months of 2013. It was convincing proof, they said on the nightly news, that the economy had finally recovered from its chronic lethargy.
However, according to a revised estimate released Thursday by the U.S. Commerce Department’s Bureau of Economic Analysis, that 3.2 percent figure was a wild exaggeration.
The U.S. gross domestic product (GDP), the broadest measure of our country’s entire economic output, grew no more than 2.6 percent in the fourth quarter — a pitifully low growth rate for the largest economy in the world.
“Averaged across the four quarters of last year, real GDP added 1.9 percent in 2013 from 2012,” said Forbes’ website reported.
You didn’t hear about this on the nightly network news on Thursday? I’m not surprised. More often than not, the network news tends to ignore poor economic data, while exaggerating the significance of occasional numbers that they say prove the Obama economy is turning around.
But 1.9 percent growth for all of last year is dreadful by any comparison, and economists aren’t expecting anything much better than somewhere around 2 percent in the first quarter and maybe beyond. By any relevant comparison, this is another sign that the U.S. economy continues to stumble along at a weak, subpar pace in the sixth year of Barack Obama’s economically unfulfilled presidency.
It’s “hardly the 4 to 5 percent [growth rate] needed to provide enough jobs and restore housing prices to prerecession levels,” says Peter Morici, an economist at the University of Maryland’s School of Business.
That’s the kind of robust economic growth rate we need to produce 350,000 jobs a month to boost employment to prerecession levels. Instead, the economy is often producing far fewer than 200,000 jobs a month — nowhere near what is needed to put Americans back to work.
Mr. Obama’s underperforming economy created a little more than 100,000 jobs in January, and a disappointing 175,000 in February, with little expectations of significantly larger job numbers in the months to come. Indeed, the jobless rate inched up last month to 6.7 percent because of the weak jobs numbers and a growing number of discouraged long-term job seekers who have quit looking for work.
If all of these uncounted discouraged workers began looking for a job again, the real unemployment rate would be 9.6 percent, Mr. Morici says.
With the fourth-quarter economic growth rate running in the anemic 2 percent range, economists aren’t expecting the GDP to improve much in the first half of this year, either.
“We’ve had a significant falloff,” Dan North, chief economist for Euler Hermes, told Forbes.
A chief reason economic growth has slowed, he says, can be found in a separate Bureau of Economic Analysis report, which shows that personal income “hasn’t grown in several months, making it unlikely consumer demand will pick up in the months ahead.”
While some economists are forecasting GDP growth may reach 3 percent later this year, even that would be subpar for our economy. “The U.S. is not on the verge of a boom. GDP growth of 3 percent would be the fastest rate since 2005, [but] it is still well below the average of 4 percent in the 1990s,” Mr. Hermes said.
That was in President Clinton’s second term after he had cut the capital-gains tax rate, triggering a wave of new venture-capital investment that led to stronger economic growth and a job boom, especially in the high-tech sector.
Under Mr. Obama, on the other hand, the capital-gains tax has risen for high-income investors, reducing risk-taking and shrinking job growth. That’s why investors have grown more pessimistic about the direction of our economy and why the stock market has been in decline.
“As it stands right now, the first-quarter 2014 growth rate is likely to be slower than” the fourth quarter in 2013, says Steve Blitz, chief economist at ITG Investment Research.
Why was 2013 such a lackluster year for the economy? In an analysis last week, Mr. Morici spelled out what happened during the course of the year. In a nutshell, he says, government tax increases were largely to blame.
“Throughout 2013, higher taxes on all income classes — President Obama’s levies on the wealthy, higher local taxes on the middle class, and reinstatement of Social Security taxes on lower-income workers — depressed consumer spending.”
The remaining three years in Mr. Obama’s presidency are unlikely to get much better, if the latest economic figures and studies are any forecast of the future.
In an article in The Washington Post headlined “Future bleak for long-term jobless,” a study presented last week by the liberal Brookings Institution told why millions of jobless Americans can’t expect to find work anytime soon.
Former White House economic adviser Alan Krueger, author of the study, calls “people who have been out of a job for six months or more an ‘unlucky subset of the unemployed’ who exist on the margins of the economy — with faint hope of returning to productivity,” the newspaper said.
Interest rates are headed up, driven higher by the Federal Reserve’s grossly mistaken belief that the economy is improving and thus, it can take its foot off its stimulus pedal. That will likely wreak havoc with the housing industry, shrinking home sales and the availability of construction jobs.
The average rate for the 30-year mortgage rose to 4.40 percent recently, according to government mortgage buyer Freddie Mac. It’s likely to go higher.
The number of Americans who signed contracts to buy existing homes fell for the eighth month in February. That’s the lowest level since 2012, says the National Association of Realtors.
This economy stinks. Even though it’s not getting reported on the evening news, the American people know that our country has been moving in the wrong direction ever since 2009.
Donald Lambro is a syndicated columnist and contributor to The Washington Times.