Economists React to First Quarter GDP Report: ‘Stronger Than It Appears’

The U.S. economy grew at the slowest pace in three years during the first quarter, rising at a 0.7% rate, down from the prior quarter’s 2.1% rate. Here are early reactions from economists and analysts: “Perhaps most encouraging, business investment in equipment, which had languished for two years, posted a 9.1% annualized advance (I had looked for a 6% rise). If the government can pull off corporate tax reform, I look for a torrent of investment projects to be unleashed. Until then, gains will be limited.” —Stephen Stanley, Amherst Pierpont Securities [wsj-responsive-sandbox id = "0" ] “Economy stronger than it appears in [first-quarter] report, already showing signs of accelerating again. Tailwind for wages encouraging.” —Diane Swonk, DS Economics “While consumers may have stood still in the first quarter, sluggishness in consumer spending did not translate to the housing market…Housing is Continue reading "Economists React to First Quarter GDP Report: ‘Stronger Than It Appears’"

First-Quarter U.S. Growth – At A Glance

Matt Rourke/Associated Press
Winter of Discontent First-quarter GDP growth frequently looks soft, a possible by-product of measurement issues. The Bureau of Economic Analysis has tried to correct the problem with seasonal adjustments but some economists believe it remains, understating growth in the first quarter and overstating it later in the year. The underlying trend, though, has been undisturbed through the latest expansion: annual growth around 2%. Compared to the same period one year earlier, GDP advanced 1.9%. Consumer Caution Consumer confidence soared following Donald Trump’s election, but spending hasn’t matched sentiment. Personal consumption expenditures advanced a measly 0.3% in the first quarter, the slowest pace since the end of 2009. Consumers contributed 0.23 percentage point to the headline GDP number. The pullback may be temporary as warm weather damped demand for home heating–service spending advanced at the slowest pace in four years. Much of the weakness, however, Continue reading "First-Quarter U.S. Growth – At A Glance"

Why the GDP Report Could Make U.S. Growth Look Rosier Than It Is

On Friday the government will release data that’s widely expected to show slow growth in U.S. output in the first quarter. Now—even before its release—there’s evidence output growth was even slower than this estimate will convey. The Commerce Department’s Bureau of Economic Analysis won’t incorporate into its growth estimates recently revised U.S. retail sales data that were made public Wednesday. Instead, these revisions will be incorporated next month, when the BEA updates its first-quarter estimates of gross domestic product, the government’s broadest measure of the economy’s output. The downward revisions to the retail-sales data suggest consumer spending was weaker in the first quarter than previously estimated. But the revisions didn’t come through soon enough to incorporate into the upcoming report. Using the new figures could subtract two-tenths of a percentage point from the “headline” figure in Friday’s GDP report, said Ben Herzon, economist with the private forecasting Continue reading "Why the GDP Report Could Make U.S. Growth Look Rosier Than It Is"

5 Things to Watch in the First-Quarter GDP Report

Stephanie Keith/Bloomberg
The U.S. economy appears to have stumbled in the first quarter of 2017. The Commerce Department on Friday releases its first estimate of the nation’s gross domestic product for January through March. The report marks the first major snapshot of the economy during the Trump administration, which has pledged to boost growth. Economists surveyed by The Wall Street Journal estimate GDP grew at a 1% annual rate in the quarter, roughly half the economy’s average performance in recent years. #1: Winter Blues The U.S. economy has a habit of starting the year out sluggishly only to rebound in the spring and summer, and this year appears no different. Many economists believe there are flaws in how the government adjusts data for seasonal factors that might be understating growth, and the Labor Department has worked to improve its methods. Whatever the case, the underlying trend likely remains intact: 2%
Continue reading "5 Things to Watch in the First-Quarter GDP Report"

Startups Remain Stuck: Job Creation From New Establishments Lags

The U.S. startup scene is languishing. Beneath headlines generated by Snap Inc.’s multibillion-dollar IPO or the latest Silicon Valley darling, new companies simply aren’t the same economic engine they were in decades past. During the latest expansion, new establishments have accounted for a little more than 11% of all new private-sector jobs created in the U.S. During the 1990s, the figure was 15%, according to Labor Department data released Wednesday. That may seem a small shift, but those few percentage points add up to nearly 300,000 jobs a quarter. The startup slowdown also suggests a loss of dynamism across the broader U.S. economy, with Americans either less willing or less able to launch a new venture, and a decline in the kind of churn that leads to greater opportunity for workers and rising productivity. “The evidence suggests that the decline in dynamism is reason for concern Continue reading "Startups Remain Stuck: Job Creation From New Establishments Lags"

Democrats’ Ever-Rising Minimum-Wage Target

Democratic leaders in Congress are expected to announce a proposal seeking to raise the federal minimum wage to $15 an hour, more than double the existing $7.25 an hour. While the federal minimum wage hasn’t budged in eight years, Democratic proposals have climbed—far outpacing inflation. Democrats have increased their minimum-wage ask by $6 an hour since President Barack Obama proposed a $9 hourly pay floor in 2013. None of the prior three proposals have passed, and the latest plan is unlikely to gain traction in a Republican-controlled Congress. A $15-an-hour wage would bring the federal level in line with pay floors already approved in California and New York, and put the federal government back in the role of setting the minimum wage in most of the country. But a steep raise, which Democrats want phased in by 2024, would have a dramatic effect in 21 states still using $7. Continue reading "Democrats’ Ever-Rising Minimum-Wage Target"

Why First-Quarter Growth Is Often Weak

The U.S. economy is off to a slow start. Again. First-quarter gross domestic product is expected to expand at a 1% seasonally and inflation-adjusted annual rate. The figure would be a disappointment alongside strong job creation and soaring consumer optimism following the election of Donald Trump. A weak reading, however, wouldn’t be a surprise. Slow first quarters followed by rebounds have been common in recent years, generating short-term consternation but leaving the overall economic trajectory little changed. Since the latest recession ended, first-quarter growth has averaged a 1% pace. The remaining three quarters have averaged 2.5%, leaving the overall rate of growth at a familiar 2.1%. That means there is a good chance a poor first-quarter reading on GDP will be another head-fake. It also means it’s harder for policy makers and economists to decipher potential warning signs in the real-time GDP data. There are some pretty Continue reading "Why First-Quarter Growth Is Often Weak"