We are Winning. Is Anybody Keeping Score?
Last month we received the Advance values for the First Quarter 2017 GDP (Gross Domestic Product.) The media were expressing concern with an advance value of 0.7% Where was this concern during the past eight years. The good news is that the relatively weak 2017Q1 advance values was revised higher. That is the end of the story for nearly everybody else. "Back to President Trump's European Adventures," followed by "The Invisible Russian Conspirator," and "We don't Need No Stinking Wall." The headline number is the hypothetical GDP value for the year based on one quarter of activity. Remember that Fourth Quarter we have annual surges in activity. First quarter is "always sluggish." Real GDP is the year over year same quarter growth. This data is "12 months" out of date by the time it is released." Annualized GDP is the "autopilot" on the plane, constantly adjusting, while the Real GDP is the destination.
The Headline Gross Domestic Product was Better than Six of the Past Nine Years. The Annualized GDP Grew at 1.2% from Fourth Quarter of 2016. We saw negative values during 2008, 2009, 2011, and 2014. We grew at 0.8% during 2016, 0.9% during 2007. The bounce we saw during 2013q1 was based on a weak 2012q4 value. The same could be said regarding the "strong" 201Q1 value. The data indicates that we are seeing growth in Exports, both goods and services. What is going unreported elsewhere is that Government Spending has been a drag on the Annualized GDP 10 of the past 16 quarters.
Real GDP Grew at a Faster Pace than Seven of the Past Nine Years. The Real GDP is the pace that the economy grew during the past four quarters. The federal budget is based upon a growing GDP. Former President Obama used to like to compare the Federal Debt to Total Gross Domestic Product. The problem is that he should have been comparing the debt to Gross Domestic Income - The Debt is our mortgage on the economy. The problem we have here is that the Real GDP did not exceed three percent for an entire year under President Obama. President Obama saw a contraction of 2.8% during his first year. He saw growth under 2.0% for the years 2011, 2013, and 2016. His best years were 2010 as we were coming out of the Great Recession and 2015 when the economy grew at 2.5%. We have now had back to back quarters of Real GDP growth of 2.0%. Real GDP was over 2.5% for most of the 1990s, and early 2000s. Real GDP was over 3.5% between 1983 and 1989. with a peak Real GDP of 7.3% during 1984 . WE can grow at a sustained rate of over 3%.
The economy is growing. We are adding jobs, full-time jobs. Even though some believe that we are in a Retail Ice Age, Retail Sales grew faster this April than during April 2016. Automobile dealer and parts sales are driving the economy, and Truck Sales are outpacing automobile sales. New home sales and existing Homes are selling faster than they have during the past decade. There is still a long road ahead for full recovery of new home sales as compared to the peak unit year of 2005. We are still stuck in the 1980s and 1990s for New Home Sales. Existing Home Sales are being held back by a lack of inventory. The weekly unemployment claims, first-time and continuing claims, are at generational lows.
Squirrels Abound. But what about James Comey? What about the Invisible Russian Man? What about terror attacks in Europe? What is Former President Obama saying? The media could be portrayed as the dog from the movie "Up." Squirrel! Business news is obsessed with the day to day drama in and around the White House. We should be focusing on the economy. If we are winning and nobody wins trophies how do we keep score? Is anybody really keeping score?
Week we will see the results from the May Employment Situation Report.The "real" U-3 unemployment level may drop below 6 million people. We may add another one million jobs, non-seasonally adjusted CPS full-time and part-time jobs. The creation of jobs, full-time jobs, even if they are seasonal, can generate more retail sales. More full-time jobs, permanent jobs, can spur housing sales. Housing sales spurs retail sales, including automobile sales. If we see people being hired and we continue to see Gross Private Domestic Investment grow, GDP will grow.
It's the economy.