ABC News has an article out this weekend which says that the view of the US economy is "clouded". Really? The point of the article is that the economy is doing well but government statistics like the May employment report raise doubts about economic prospects. This take by ABC News of the American economy is so idiotic, that I wonder if they actually believe this stuff or if they just write it because it's what Hillary Clinton or president Obama want to hear.
Let's look at reality. First and most important, over the last six months for which we have data, the economy grew at a rate of less than 1%. That's not someone's opinion; it's the official statistical measurement of the GDP by the United States government. That is a terrible growth rate. To put that in perspective, remember that the average growth rate in the USA since World War II has been about 3.5%. That means that for the last six months, America has been growing at less than 30% of the average rate.
Second, over the last year and a half, total corporate profits have been shrinking, not growing. While there may not be much sympathy for corporations across the country, the decline in profits is a very bad sign for the economy. Corporate profits fund investment, and investment is the principal cause of economic growth. Lower profits generally means slower growth or even a recession.
Third, jobs are a lagging indicator. That means that as economic growth speeds up or slows down, the change in the jobs market follows the trend but only some months later. We know that according to the GDP figures, the economy has been limping along since last October. That slowdown in growth is only now starting to show up in the jobs figures in a major way.
Fourth, according to an analysis by a prominent bank, the risk of recession in the USA is now at its highest point since 2008. J.P.Morgan analysts use a large number of indicators and they calculate a 36% chance that we are heading into a recession.
To be fair, no one knows if we are going to see a recession or if the economy will surprise and turn up once again. All the data on GDP and employment and corporate profits could recover and things could be better. The current data, however, doesn't indicate that reversal is happening.
So let's go back to ABC News where we started. The statistics don't give a "clouded" view. They give an ominous one. The economy is not going well with some odd statistics making people wonder what's coming. The economy is limping along at best with the statistics indicating that a recession is coming soon. Look, we all know this is an election year so ABC wants to say what supports the Democrats. Still, it's just wrong for a national news organization to put out articles that no reasonable person could believe.
Let's look at reality. First and most important, over the last six months for which we have data, the economy grew at a rate of less than 1%. That's not someone's opinion; it's the official statistical measurement of the GDP by the United States government. That is a terrible growth rate. To put that in perspective, remember that the average growth rate in the USA since World War II has been about 3.5%. That means that for the last six months, America has been growing at less than 30% of the average rate.
Second, over the last year and a half, total corporate profits have been shrinking, not growing. While there may not be much sympathy for corporations across the country, the decline in profits is a very bad sign for the economy. Corporate profits fund investment, and investment is the principal cause of economic growth. Lower profits generally means slower growth or even a recession.
Third, jobs are a lagging indicator. That means that as economic growth speeds up or slows down, the change in the jobs market follows the trend but only some months later. We know that according to the GDP figures, the economy has been limping along since last October. That slowdown in growth is only now starting to show up in the jobs figures in a major way.
Fourth, according to an analysis by a prominent bank, the risk of recession in the USA is now at its highest point since 2008. J.P.Morgan analysts use a large number of indicators and they calculate a 36% chance that we are heading into a recession.
To be fair, no one knows if we are going to see a recession or if the economy will surprise and turn up once again. All the data on GDP and employment and corporate profits could recover and things could be better. The current data, however, doesn't indicate that reversal is happening.
So let's go back to ABC News where we started. The statistics don't give a "clouded" view. They give an ominous one. The economy is not going well with some odd statistics making people wonder what's coming. The economy is limping along at best with the statistics indicating that a recession is coming soon. Look, we all know this is an election year so ABC wants to say what supports the Democrats. Still, it's just wrong for a national news organization to put out articles that no reasonable person could believe.
No comments:
Post a Comment