August 28, 2008

Despite Sharp Upward 2Q GDP Revision, Media, and Some Experts,’ Won’t Let Go of ‘Recession’ Claim

BeaLogoIn case traditional news outlets “forget” to tell you, Uncle Sam announced this morning that second-quarter Gross Domestic Product (GDP) growth was revised sharply upward to 3.3% from the late July’s advance estimate of 1.9%.

Dude, where’s my recession?

Y’know, the recession that Barack Obama claimed we “almost certainly in” back in mid-July?

Believe it or not, there are supposedly legitimate economists out there who, despite today’s news, still insist that we are in a recession — right now! — and have been for some time. And of course, reporters are finding them, and quoting them.

Earlier this week, when it was clear that a significant upward GDP revision was in the works, “journalists” at MarketWatch and CNNMoney.com, with the help of their “experts,” did everything they could to downplay its impending significance. One even called it a “mirage.”

On Sunday, MarketWatch’s Rex Nutting took his shots. Based on previous posts on his work, and past direct correspondence yours truly has had with him, Mr. Nutting seems to be a guy who would have a hard time finding the sun on a cloudless day.

Here is some of his dismal dirge:

Big revision in GDP won’t mean much
Housing, consumer spending expected to weaken further

The economic optimists will get a cheer from some of the economic data in the coming week, but on the whole, the data should point to an economy that’s still mighty troubled.

….. GDP growth is likely to be revised up to 2.7% annual growth from an estimate of 1.9%, according to our weekly survey of economists.

Growth that strong would normally be greeted with hosannas, but this one should come with an asterisk. The growth is mostly outside the United States, not in it.

The upward revision will be almost entirely due to stronger exports (in part due to a weaker dollar) and to much weaker imports. Net exports are contributing more to U.S. growth than at any time in nearly three decades.

Meanwhile, domestic demand is very weak and likely to get weaker in coming quarters.

….. With no more federal stimulus on the way, personal consumption should increasingly reflect the weak fundamentals,” wrote Meny Grauman of CIBC. Third-quarter spending “is looking increasingly grim.”

Predictions that consumer spending will tank have been made, and generally not materialized, for at least the past four years.

Nutting does point to housing as a legitimate concern. But that sector has been in the doldrums for at least a year, and the economy grew nicely in the second quarter in spite of its continued troubles.

Chris Isidore at CNNMoney.com updated his report for today’s GDP announcement, but, with the help of some stunning statements from certain economists, stuck to his “Pay no attention to that GDP report in the corner” guns (bolds are mine):

The economic growth mirage

Sure, the economy grew at a decent clip in the second quarter. But economists say the gain may be temporary and warn of tougher times ahead.

Despite all the talk about the U.S. economy falling on hard times this year, the economy grew at a more solid pace during the second quarter.

….. But that doesn’t mean that the United States has avoided a recession, some economists say. In fact, there are growing concerns that weakness will extend through the rest of this year and even into 2009.

“My feeling is that the recession started in the fourth quarter of 2007,” said David Wyss, chief economist with Standard & Poor’s. “I think the worst quarter will be the first quarter of 2009, which would make it a long recession.”

….. “Mostly what this report will say is, when you give somebody an $1,800 check, he spends it,” said Wyss, referring to the tax rebate received by many families.

….. several economists say they are certain the United States is in recession, and that no one should be fooled into thinking otherwise by a strong second-quarter GDP report.

That’s because it will be hard for the economy to rebound until the housing, banks and credit markets start to recover from the upheaval of the past year.

Here we have claims by economists that we can be in the third quarter of a recession while growth is registering over 3%! What in the world are these guys putting into their coffee? (I know, Democratic kool-aid.)

Both Nutting and Isidore failed to mention the two arguably biggest economic challenges we face, both of them originating from the left: The Pelosi-Obama-Reid Economy’s hammerlock on sensible energy policy, and current consumer spending restraint tied to the likelihood of punishing tax increases if there is an Obama victory in November.

Oh, and as to the jobs situation: With 1.3 million illegal immigrants having left the country in the past year, maybe the “mirage” is in the employment numbers. This year’s seasonally adjusted jobs loss of 450,000 may reflect 750,000 or so illegal workers leaving — and 300,000 citizen workers taking their place.

Cross-posted at NewsBusters.org.

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4 Comments

  1. Media Won’t Let Go of Recession, Despite Sharp Upward 2Q GDP Revision…

    Believe it or not, there are supposedly legitimate economists out there who, despite today’s news, still insist that we are in a recession — right now! — and have been for some time. And of course, reporters are finding them, ……

    Trackback by Conspirama — August 28, 2008 @ 12:25 pm

  2. [...] Media Won?t Let Go of Recession, Despite Sharp Upward 2Q GDP Revision By TBlumer several economists say they are certain the United States is in recession, and that no one should be fooled into thinking otherwise by a strong second-quarter GDP report. That?s because it will be hard for the economy to rebound until … BizzyBlog – http://www.bizzyblog.com [...]

    Pingback by Free Economy Blogs» Blog Archive » - United States Economy Recession — August 28, 2008 @ 1:35 pm

  3. I was playing with the not seasonally adjusted numbers looking at table A11, unemployment by industry. It seems the big numbers (increases) come from government, Leisure & Hospitality, Education & Health (you noted that before with teachers being included in the unemployment stats), Wholesale & Retail.

    Looking at table A10, I see the total number employed has not dropped but risen from August of last year. Run it with the graphs to see the level off of job creation from last year. The issue is not of less jobs but insufficient job creation to assimilate new entries from high school and college. Note the lack of tracking/corelation between the employed graph and the unemployed graph.

    Next note the Management, business, and financial operations occupations are on the upswing in employed.

    Service occupations are peaking in both employed and unemployed – seems rather odd to me????

    Sales and related occupations are going down.

    Office and administrative support occupations are going down.

    Farming, fishing, and forestry occupations are nearing the top of their seasonal employment cycle, however, the long term out look based on the 10 years is this area is shrinking in employment.

    Construction and extraction occupations seems to be on the upswing.

    Installation, maintenance, and repair occupations looks to be peaking seasonally but there seems to be a downward trend in employment in this sector.

    Production occupations has go in the crapper long term but seems to have leveled off.

    Transportation and material moving occupations seems to have peaked seasonally, but long term looks good.

    Comment by dscott — August 28, 2008 @ 2:26 pm

  4. No time to look right now, but make sure you look from July to July (12 mos.), not Aug. to July. Aug is a big overall down month, IIRC.

    Comment by TBlumer — August 28, 2008 @ 3:05 pm

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