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.
It’s Official: No Government Shutdown – for Now
President Trump signed a short-term continuing resolution today to fund the federal government through Friday, December 22.
Bloomberg called the maneuver “a monumental piece of can kicking,” which is no doubt the case, but at least you’ll be able to visit your favorite national park over the weekend.
Here's to small victories!
Greenspan Has a Warning About the GOP Tax Plan
The Republican tax cuts won’t do much for economic growth, former Federal Reserve Chair Alan Greenspan told CNBC Wednesday, but they will damage the country’s fiscal situation while creating the threat of stagflation. "This is a terrible fiscal situation we've got ourselves into," Greenspan said. "The administration is doing tax cuts and a spending decrease, but he's doing them in the wrong order. What we need right now is to focus totally on reducing the debt."
The US Economy Hits a Sweet Spot
“The U.S. economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year,” The Wall Street Journal reports. But the milestone was reached, in part, because the Congressional Budget Office has, over the last 10 years, downgraded its estimate of the economy’s potential output. “Some economists think more slack remains in the job market than October’s 4.1% unemployment rate would suggest. Also, economic output is still well below its potential level based on estimates produced a decade ago by the CBO.”
The New York Times Drums Up Opposition to the Tax Bill
The New York Times editorial board took to Twitter Wednesday “to urge the Senate to reject a tax bill that hurts the middle class & the nation's fiscal health.”
Using the hashtag #thetaxbillshurts, the NYT Opinion account posted phone numbers for Sens. Susan Collins, Bob Corker, Jeff Flake, James Lankford, John McCain, Lisa Murkowski and Jerry Moran. It urged readers to call the senators and encourage them to oppose the bill.
In an editorial published Tuesday night, the Times wrote that “Republican senators have a choice. They can follow the will of their donors and vote to take money from the middle class and give it to the wealthiest people in the world. Or they can vote no, to protect the public and the financial health of the government.”
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Can Trump Succeed Where Mnuchin and Cohn Have Flopped?
President Trump met with members of the Senate Finance Committee Monday and is scheduled to attend Senate Republicans’ weekly policy lunch and make a personal push for the tax plan on Tuesday. Will he be a more effective salesman than surrogates in his administration?
Politico’s Annie Karni and Eliana Johnson report that both Democrats and Republicans say Mnuchin and chief economic adviser Gary Cohn have repeatedly botched their tax pitches, “in part due to their own backgrounds” as wealthy Goldman Sachs alums. “House Speaker Paul Ryan earlier this month asked the White House not to send Mnuchin to the Hill to talk with Republican lawmakers about the bill, according to two people familiar with the discussions — though Ryan has praised the Treasury secretary’s ability to improve the legislation itself,” Karni and Johnson write.