The parade of bad economic news just keeps coming like an endless line of clowns piling out of a tiny car at the circus. However, it's anything but entertaining as the "recession" word gets mentioned ever more frequently. Today's entries come from the
Personal Income and Outlays report for June of the Commerce Department's Bureau of Economic Analysis. Personal income went up by 0.1 percent, half as much as experts had expected, and personal consumption expenditures fell 0.2 percent, the first such retreat in two years. Experts had expected PCE to rise by 0.2 percent.
The only positive news in the report is that inflation eased off, one important factor being reduced gasoline prices.
The report also included revisions to "personal income less transfer payments," that is, transfer payments to individuals by the government. It had been previously calculated that this category had fallen by 7 percent at the trough of the Great Recession over the peak of the expansionary period before it. Now that plunge is estimated at an astonishing 11 percent.
This adds to what we learned in the report released Friday on the gross domestic product. For the second quarter, annualized GDP growth was a pitiful 1.3 percent and the revised figure for the first quarter was 0.4 percent. The government's revisions for periods back to 2007 found that GDP growth had been even weaker during the recession than previously calculated. In other words, when we thought things were pretty bad, a post-World War II record for bad, they were actually considerably worse. Instead of shrinking 2.6 percent in 2009, as previously estimated, the economy dropped by 3.5 percent.
Given anemic consumer spending, a slowdown in manufacturing, the outrageously high official unemployment rate of 9.2 percent (and the fact more than 25 million Americans want full-time jobs but can't find them), it's small wonder that consumer confidence is down. With government spending now captive of ideologues who think income inequality and the lowest tax rates in eight decades still aren't where they need to be, the potential for a double-dip recession is gaining ground. That's a WTF moment for Americans who believe we never emerged from the Great Recession, no matter what the experts claim. Even the neo-liberal magazine The Economist gets it:
If nothing else, this awful [GDP] report helps to solve a number of lingering mysteries concerning the crisis. Arguments that unemployment must be structural, given the failure of projected growth rates to generate new hiring, now look silly. Projected growth rates were simply overstated, and current unemployment is exactly what we'd expect given such a feeble recovery. Those overly optimistic assessments of the likely impact of interventions, from fiscal stimulus to QE, also make much more sense now. Policymakers were fighting a fire far more intense than they recognised.
Of course, the previous underuse of countercyclical policy suggests that it's more important than ever to get policy right now. Unfortunately, Washington is failing miserably on this score.
Unfortunately, that's not news.