We Just Went Through the Worst Month Since the Great Recession
We already knew the economy really struggled over the first few months of 2015, with March being especially rough. A new report from economists at Macroeconomic Advisers shows just how bad a month it really was.
The forecasting firm, which tracks economic progress on a monthly basis rather than just a quarterly one, now says that GDP fell 1 percent in March. “This was the largest decline since December 2008, when the U.S. economy was in the throes of recession,” its update notes.
The Commerce Department initially estimated that GDP grew at a seasonally adjusted annual rate of 0.2 percent in the first quarter. An updated report, due May 29, is now expected to show that the economy actually shrank over the first three months of the year. J.P. Morgan economists have lowered their tracking estimate of first-quarter GDP from -0.8 percent to -1.1 percent based on data released over the last two days.
Related: Why So Many Americans Are Trapped in ‘Deep Poverty’
As we’ve written before, though, the downturn isn’t necessarily reason to worry about the fundamental health of the economy, or at least it shouldn’t stoke fears that we’re diving into another recession. As the Macroeconomic Advisers report explains, “A sharp decline in net exports more than accounted for the decline in monthly GDP, as resolution to the West Coast port dispute led to a surge in imports to well above the recent trend. As a result, they write, they believe the one-month plunge “overstates the underlying weakness in the economy.”
That’s not to say the economy is particularly strong, either. Both Macroeconomic Advisers and J.P. Morgan now forecast second-quarter GDP growth to come in at a tepid 2 percent annualized rate.
Number of the Day: $132,900
The cap on Social Security payroll taxes will rise to $132,900 next year, an increase of 3.5 percent. (Earnings up to that level are subject to the Social Security tax.) The increase will affect about 11.6 million workers, Politico reports. Beneficiaries are also getting a boost, with a 2.8 percent cost-of-living increase coming in 2019.
Photo of the Day: Kanye West at the White House
This is 2018: Kanye West visited President Trump at the White House Thursday and made a rambling 10-minute statement that aired on TV news networks. West’s lunch with the president was supposed to focus on clemency, crime in his hometown of Chicago and economic investment in urban areas, but his Oval Office rant veered into the bizarre. And since this is the world we live in, we’ll also point out that West apparently became “the first person to ever publicly say 'mother-f***er' in the Oval Office.”
Trump called Kanye’s monologue “pretty impressive.”
“That was bonkers,” MSNBC’s Ali Velshi said afterward.
Again, this is 2018.
Chart of the Day: GDP Growth Before and After the Tax Bill
President Trump and the rest of the GOP are celebrating the recent burst in economic growth in the wake of the tax cuts, with the president claiming that it’s unprecedented and defies what the experts were predicting just a year ago. But Rex Nutting of MarketWatch points out that elevated growth rates over a few quarters have been seen plenty of times in recent years, and the extra growth generated by the Republican tax cuts was predicted by most economists, including those at the Congressional Budget Office, whose revised projections are shown below.
Are States Ready for the Next Downturn?
The Great Recession hit state budgets hard, but nearly half are now prepared to weather the next modest downturn. Moody’s Analytics says that 23 states have enough reserves to meet budget shortfalls in a moderate economic contraction, up from just 16 last year, Bloomberg reports. Another 10 states are close. The map below shows which states are within 1 percent of their funding needs for their rainy day funds (in green) and which states are falling short.
Chart of the Day: Evolving Price of the F-35
The 2019 National Defense Authorization Act signed in August included 77 F-35 Lightning II jets for the Defense Department, but Congress decided to bump up that number in the defense spending bill finalized this week, for a total of 93 in the next fiscal year – 16 more than requested by the Pentagon. Here’s a look from Forbes at the evolving per unit cost of the stealth jet, which is expected to eventually fall to roughly $80 million when full-rate production begins in the next few years.
