It was widely expected we'd see a drop in economic growth in the fourth quarter -- October, November, and December -- and sure enough, the initial estimates shows a slight contraction for the first time in years.
The economy shrank in the fourth quarter for the first time since the recession, but the U.S. still appeared to be on a modest growth path if unusual factors are stripped out.
Gross domestic product contracted by a 0.1% annual rate, down from 3.1% in the third quarter, based on the first of three readings by the Commerce Department.
That was well below the MarketWatch forecast of 1.0% increase. The advance GDP report, however, relies on some estimates and is often subject to sharp revisions.
The -.01% for the quarter is the first negative quarter since the spring of 2009, though this estimate will be revised in the coming months.
I should also note that this is not necessarily evidence of a new recession. Yes, the economy shrank a little in the fourth quarter, but the economy grew at a 2.2% clip in 2012, and most expect similar growth in 2013. Indeed, though no one's happy about this morning's report, there are some bright spots, including healthy consumer spending, business investments, and an improved housing sector. On the whole, the report really isn't that bad.
So why did we see slight contraction in the GDP? In large part because spending cuts -- federal, state, and local -- shaved more than a full percentage point off GDP growth.
I realize the right doesn't want to hear or believe this, but when Washington spends far less -- in this case, the cuts focused on defense -- it takes capital out of the economy and undermines growth. It is, as a practical matter, a form austerity, which hits the brakes on the economy. This is Economics 101 and yet Republicans continue to insist that it is the only policy they really care about.
It's something to keep in mind as the Beltway's preoccupation with debt reduction, not the recovery, continues unabated. It's also a reminder that the automatic sequestration cuts may very well push the nation closer to a recession this year.
Above, you'll find a chart showing GDP numbers by quarter since the Great Recession began. The red columns show the economy under the Bush administration; the blue columns show the economy under the Obama administration.
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The right wing purposely misrepresents the impact of cuts and will focus their accusation on the administration that not only was it lack of enough spending cuts but will also say that the tax increases that are coming in the next quarter will further shrink the economy.
The administration needs to get out in front of this right now before the right wing noise machine starts spewing their distorted interpretation
Come on people look at Greece & the E.U., right now all are suffering thru another recession because politicians took an axe to their budgets! Government budgets are NOT equal to household budgets and the false equivalence that's been made for "belt tightening" isn't passing in the "real world" where it has been tried!
Zora, facts don't matter! The Europeans just weren't right-wing ENOUGH!
Being a right-winger means your views are non-falsifiable.
How do you argue historical trends, patterns, and probability with a party that denounces as "lies straight from the pit of Hell," the scientific processes of discovery?
Mmmmmmm...austerity! Tastes like chicken. Just wait until the sequester hits.
It'll be interesting to see how America reacts to the sequester which will do nothing but prove that the GOP is full of @!$%# and America needs government spending.
Why did Obama sign the sequester in as law? He must have thought it worthy? Why has Obama himself even suggested cuts to Federal Spending? Do you agree with him on this issue- I would suggest you are against him on it based upon your comments.
I think the sequester is a stupid piece of political theatre. Notice that nothing has come from it and the whole thing was OH SO IMPORTANT because the GOP is soooooooooooooo against the deficit (that they ran up during 8 years of GWB, off the books wars and tax cuts at the same time, Medicare Part D...none of which was paid for).
ok- you've said your opinion of the sequester. You obviously have a different opinion of it than others, including Obama, Pelosi and Reid. Reid passed it as Senate Leader, Pelosi voted for it, and Obama agreed with it and signed it into law. You and I can at least agree on the fact all three of them were wrong.
Can you say austerity???
How about the "fiscal cliff", isn't that a factor as well? Supposedly businesses were holding back...
Actually, Macro is usually Economics 102, not 101 (which is usually Micro) but either way, the fact that the press lets Republicans get away with saying that our out of control deficits are the reason the economy isn't growing indicates that the economic illiteracy extends beyond the right wing echo chamber.
More like the media's obsession with always telling the story as "one side said this and the other side said that, and we aren't going to bother to tell you who is more factual and who is just making @!$%# up". The loss of true journalism happens when 6 major corporations are allowed to control over 90% of the media. You get the news that is approved by Wall St, Wal Mart, the top 1%, and promulgates their propaganda as a means of doing business.
The government is a consumer just like every one of us. When I buy a TV, I am supporting the jobs of the people who produce the raw materials, the factory workers who build the parts from the raw materials and turn those parts into TVs, the workers who transport the TV to the store, and the store that sells me the TV. That is no different than when the government buys a million TVs for use in their operations, except in scale, of course. Despite what the right says, government has always had to buy things, even back to the days of the Founding Fathers. The sad, basic fact is that righties want all the things government provides, from roads to schools, to defense, to police and fire and ambulance services, to schools, to food inspection services, but they don't want to pay for it. That goes double for corporations, who are content to make tons of money when benefitting from those government-provided services, but think that everyone else should bear the cost burden.
Roads? Paid for by GAS TAXES by the public...Schools? Paid for by taxes from levees and home taxes...Government does nothing but provide unfunded mandates and failed social programs for these schools.THE PEOPLE provide for these services and hold the right to determine the extent of the services they pay for. Government is nothing more than a collection of individuals for the most part feathering their nests. Somehow Liberals for gwt there is NO Government that IS NOT beholden to the people...NOT the other way around...
Scott, your ignorant, Tea Partyesque rant shows that you haven't even got the first clue of what government does. If we eliminated all government, it still wouldn't eliminate the need for the services it provides. Instead, each individual would still have to pay for defense, education, roads, fire, police, healthcare and a multitude of other things. How would you pay for it? Well, in addition to all your other monthly bills that you receive, you would also get monthly bills for everything you now pay taxes for. Here's your school bill, your defense bill, your road bill, your police bill, your fire protection bill, your food inspection bill, your air traffic control bill.....the list would literally be endless. If government is such a bad idea, why has it been around for literally thousands of years, since the dawn of civilization? Apparently not only did your parents do an execrable job of raising you, your schools and teachers also apparently let you down. If you want the things that society, aka the government provides, then pay for it like everyone else. If you are offended by being asked to do so, please absent yourself from society, and go live in a cave somewhere. Stop taking advantage of the things that the rest of us taxpayers fund if you refuse to contribute. Moocher!
First, I would point out that .01% is very likely within the margin of error of the estimate. Second, these numbers are always revised. Third, the following major factors impacted macro-economic measures in the 4th quarter:
1) Anxiety about the "fiscal cliff" delayed investment and pushed companies to pay dividends early (aug, sept), or even pay dividends rather than re-invest capital, this impacts macro-economic indicators.
2) Manufacturing slowed down in the 3rd quarter. It is typically a "leading index"...that is, the effects aren't felt in macro-economic measures for 1-2 quarter. (incidentally, it manf. grew in october and november, so expect a GDP bump in the 1st quarter 2013)
3) Despite positive consumer sentiment, holiday spending was lower than anticipated...given that consumer spending is a huge chunk of economy, this is not stunning news.
4) Real estate was basically flat (or slightly down) in the 4th quarter, this is another huge chunk of the economy from a macro perspective. (also incidentally, builders permits, housing prices, and inventories are all positive in the 1st quarter)
The impact of government spending on the GDP number, given the above factors, is suspect as a "main cause."
Seriously, steve, if you want to make comments about macro-economics, you might want to actually know something about what is happening other than the political agenda you are pushing.
Finally, the 4th quarter is likely a typical variation in the economy, rather than an indication that we are slipping into recession. It will probably be revised into slightly positive in the 2nd quarter, and 1st quarter results are also forecast to be positive.
Oh....it COULDN'T be the higher taxes and the onslaught of more and more regulations which strangle American business. But hey, look at the bright side...if Hussein has his way...Americans will have another 11 MILLION (or more) illegals to contend with in the search for the few jobs that are out there. His last 4 years have been a continued slide of the economy, as well as continued record highs of Food Stamps and Welfare recipients. At least Hussein is staying busy with the REALLY important stuff like Giving illegals amnesty and treading on the 2nd Amendment. The mid-terms cannot come fast enough.
Have you ever heard the expression "be careful what you wish for"? When the midterms come, repubs will be even more of an irrelevant party than they are even now. They refuse to learn the basic lesson that the public has seen their policy ideas and decided that not only do they not want them, but they are ridiculous at best, and downright repulsive at worst. The fourth quarter saw no new taxes like you talk about it, nor any new regulations to "strangle American business". By the way, you prove that you are little more than a spoiled brat throwing a temper tantrum when you make up all sorts of non-existent facts, and call the president by his middle name. If my kid acted like you, they would get a spanking and a timeout. Apparently your parents didn't do such a good job with you.
What do you call making up of facts? 47 Million on Food stamps, a continued stagnant economy that cannot even replace the jobs being lost...the continuation of policies that strangle the Coal industry losing good paying jobs in a part of the country that is the poorest to begin with...the new healthcare law is adding taxes, the end of the Social Security tax that takes an extra 1,000 out of the pockets of someone making 50k...And come the mid terms...we will see who comes up with the net loss from the results of this failure-in-chiefs gun grabs and Amnesty policies....
Like I said, making up facts. You were completely unable to mention any new regulations that had been added, and the new taxes under the ACA didn't come into effect until January 1, which, if I read my calendar correctly, came after October, November and December of last year. This is the same ACA that the CBO estimates will cut $1 trillion from the deficit over the next decade. The social security tax cut was meant to be temporary, and in my opinion, was never a great idea, as it was taking funding away from Social Security that is needed. The President, (c'mon, I know you can say it, the nice black man is Mr. President to you), is NOT proposing to take away a single gun, no matter how much the brain damaged knuckledraggers like to claim he is. As for immigration reform, both parties are supporting it, and will actually add taxpayers to our nation, which is always a good idea. You righties have continually claimed that illegals are getting services they don't pay for. Well, you will be able to stop your whining soon, because they will be taxpayers, and they will pay for what they get. In addition, since they will be legal, employers will no longer be able to screw them out of even minimum wage pay, which again will benefit everyone, not just the new citizens.
Keep up with the goofy tantrums, scotty boy. You look like a bigger a** every time you open your mouth. You provide plenty of entertainment, but not an iota of enlightenment.
All you have to do is google EPA Regs taking effect Jan 1st...do you lie for convenience or out of ignorance? Everything from trucking regulations that touch EVERYTHING that Americans use and increases the cost of..or the Regs that increases the cost of Automobiles for new mileage requirements which is THOUSANDS per car.Regs that have closed Power plants across the US costing American jobs and increasing the price of energy (even for the poor Hussein alleges to defend) and closing Coal mines in the Appalachian area of the country. So in case you either are not intelligent enough to read these new regs...or just DO NOT WANT TO KNOW........Liberals...
OK, then let's get rid of all those regulations that saddle those poor American businesses. Know what you get then? China, where people in Beijing are dying like flies from the worst air pollution on Earth. You get Mexico, where corporations are operating like they did in 19th century America, with workers enduring long hours, abyssmal pay, poor health and shortened lifespans. You say you don't want to be beholden to government, but you sure seem eager and willing to let corporations abuse you and throw you away when you are no longer useful to them. Nothing but an eager slave willing to lay down his life so that people who look down their noses at you can use you and abuse you. I don't know whether to pity you or laugh at you. Maybe I can do both?
So, if we want the GDP to grow, wouldn't it be a good idea to pass the President's Job Act in its entirety, immediately, so that 1) citizens can be put to work within the next six months 2) their salaries will be spent, putting money back into the economy 3) generating more demand 4) which could lead to companies hiring more employees and 5) banks lending some of their surplus profits hoarded the last two+ years 6) much needed improvements for safety and improved commerce will be made by infrastructure building 7) with salaries helping people reacquire housing by buying 8) increasing the housing market and 8) allowing mobility for people to sell and move to other areas....
More than ever we need to keep repeating the need for JOBS! JOBS! JOBS! in order to grow this economy, the need for government stimulus UNTIL business will do its part, the need for Congress to approve the President's appointees so growth and work can proceed.
To those who don't want the government to assist infrastructure projects, once they are built - bridges, highways, port, & airport improvements, etc., charge minimal tolls to help pay back the government/taxpayers if you must have some form of offsetting. By the time projects are finished, millions more tax dollars will have been paid back through income tax, sales tax, B & O taxes, property taxes, etc. It's not giving "free stuff"; it's investing in our nation and our future.
Actually, it is THAT bad. Because it's completely avoidable. You may not like it, but only the government is in a position to spend while the household sector (the world's customers!) deleverage from an accumulation of massive debt due to 30+ years of wage stagnation:
http://www.youtube.com/watch?v=4bXpOUYrr1c
Like Steve says, this is Economics 101. But instead the GOP gets to make things up about becoming the next Greece. Or what will China say? Or throwing tempter tantrums about Planned Parenthood and NPR. None of which has anything to do with how our economy and monetary system works.
It's a political agenda through and through, and it's unacceptable. And it won't stop until we put our collective feet down.
What else is new? The Republicans' only goal is to be re-elected, in order to save their perceived power, continue receiving thier "free" money from the Treasury in so-called "pay and benefits" and get rich in the process.
The chart only reflects what we had already known or suspected. They don't give a @!$%# about moving this country and its citizens to a brighter future and success. They only want to keep it for themselves and their kind, however that's perceived in their twisted, self-serving minds. As a collective, their policies, as reflected in their budget proposals, party platform, positions taken, etc. do not comport with reality nad wishes of the citizens of this country, but they'd still lie, lie, lie....
Disagreements from the right? Bring it on....
Well once again steves graph is so wrong...
Go get the real GDP numbers for a change there steve, if you can that is