Skip to comments.Deception alert: Sorry, AP, 'sluggish' growth doesn't make economy 'sturdier'
Posted on 07/28/2014 10:36:48 AM PDT by Kaslin
Economic news tends to be confusing no matter where you get it from, but you really want to avoid getting from the Associated Press – and all the more so from local and regional newspapers who pick up AP stories and then put their own spins on the headlines.
You end up, as we did in Atlanta this past week, with stories based on huge deceptions that try to use numbers within the stories to mean what they don’t really mean.
The AP ran a story this week headlined: “U.S. economy, though sluggish, may now be sturdier.” That sounds like a headline someone wrote after reading the story and having no idea what it was supposed to mean. It’s “sluggish” but also “sturdier”? What on earth does that mean?
I don’t know (and neither do they), but I’m sure it doesn’t mean what the Atlanta Journal-Constitution tried to make it mean when, in one edition, they picked up the story and applied this headline: “Slow growth brings strength.”
Say what? Because growth is slow, that means the economy is strong?
George Orwell would surely smirk knowingly at that one. War is peace, freedom is slavery, slow growth is strength. Except that slow growth would actually be an improvement over what we saw in the first quarter of this year, when GDP declined by 2.9 percent. We have some work to do to get the economy back to slow growth.
But even having said that, let’s look at the case the AP tries to make for the economy being “sturdier” even as it’s “sluggish.” It’s a pretty clear case of how an economics reporters can spin their way to any conclusion they want when they don’t really know what they’re talking about:
Unemployment aid applications dropped to 284,000 this past week. The three-week average was 302,000. That’s only good in a relative sense, because you have to remember that when more than 200,000 jobs are created in an entire month, they want to throw a party. Yet we’re still getting 284,000 new unemployment claims every week? We’ve got a long ways to go before the balance is tipped in the right direction.
Fewer people are piling up credit card debt or taking on risky mortgages. This is a pretty funny one coming from the same people who complain when people can’t get credit. They’re not buying houses and not charging purchases to their credit cards because they’re broke! And that leads us to the next reason we’re supposed to be feeling better about things . . .
Banks are more profitable and holding additional cash to guard against a repeat of the 2008 market meltdown. You want to know why banks are being stingy about lending? Because new federal regulations like Dodd-Frank, not to mention constant federal investigation threats, have them proceeding with extreme caution. So the same people who are always telling us the economy needs capital to be spread around so as to achieve “Keynesian multipliers” and so forth now argue it’s good news that the banks are hording cash? The truth is that the banks make the most money when they make good loans, and they know how to determine which loans are smart for them to make. The federal government is making it harder for them to do so.
More workers hold advanced degrees. This is good news in theory only. Sure, on paper, people make more money if they have advanced degrees. But in the Obama economy, we see a growing number of people amassing debt to get degrees, only to find they can’t earn anywhere near what they were expecting when they finish school. And when 50 percent of the college graduates can’t find a job, they keep going to school. So sure, they’ve got degrees. But that’s all they’ve got.
Inflation is under control. Really? Ask the person in your household who buys the groceries on a regular basis. I did. I asked my wife, who constantly tells me that every time she goes to the store, she pays more for the same shopping cart worth of groceries as the last time. Inflation is often measured more accurately by real people on the ground, not by statisticians following theoretical models. Inflation is not under control.
Millions who have reached retirement age are staying on the job. Wait. This is supposed to be good news? Why do you think they’re still working? They can’t afford to retire! If we’re getting millions in additional goods and services produced by people past retirement age, and we’re still seeing a 2.9 percent decline in GDP, friends, that ain’t good.
That’s why I call this a deception alert. Obama’s cheerleaders at the AP know that economic news can be confusing, and that presents an opportunity for them to take a report and deceive you by offering an analysis of it that is completely nonsense.
Sluggish doesn’t mean sturdy. Slow growth doesn’t bring strength. And you’d be wise not to seek your understanding of economic news from the mainstream media – especially the AP. They don’t understand it themselves.
“Sluggish doesnt mean sturdy. Slow growth doesnt bring strength. “
When times are hard, people work harder and work to make business more efficient. It is part of the boom/bust cycle.
Thank goodness the AP is to tell us not to believe our lying eyes.
The fragile market is pumped up by ‘cheap’ money and the fed still buying billions of bonds a month. Part time work makes it look like there is job growth. And the millions of illegals Obama will grant amnesty to (like Boner will stop him) will be counted to offset the dismal labor participation rate but not for counting real unemployment.
Obamanomics. Isn’t everyone getting their 50 rounds of golf this year and rubbing shoulders with billionaires?
Remember how the Media endlessly parroted Pelosi’s “WORST ECONOMY SINCE THE GREAT DEPRESSION!”, in 2006, when umemployment was 1.8% in Indiana, and Subway was paying $13 an hour to find part-time help??
Just imagine how today’s economy would be reported were a REPUBLICAN in office?
I would look at the AP's words in the same way as I'd look at the military "preparing the battlefield."
This week the 2nd quarter GNP come out. The first quarter they were in negative territory. Everyone says that was just 'bad weather' as they've tried to talk up this economy. I have no problem with positive thinking and speaking, but it isn't good when that's where they've placed their hopes.
This headline could be the AP preparing everyone for very low growth numbers. The real problem with GDP numbers was revealed last quarter. They showed a 1% decline, but after 2 'adjustments', the actual decline was 2.9%.
Two straight quarters of decline equals a recession.
If the 'growth' on Friday is said to be 1.5% or less, then remember that the 'adjustments' last time ended up subtracting another 1.9%.
In other words, we could be in a recession as we speak, and AP is preparing the battlefield, softening the blow for their beloved Obama Administration. FWIW, the new housing numbers, a big part of the economy, showed a 1% decline.
After that arrogant pos occupant of 1600 Pennsylvania Ave was inaugurated in 2009 he started to ban the offshore drilling again
I would argue “slow growth” is more stable if the comparison is with “fast growth” based on excessive consumer (and government) debt, which the ‘growth’ ideal of most economists ... that people (and governments) keep spending whether they have the money or not.
In that sense, “slow growth” is better than fast growth based almost entirely on unsupportable debt.
Adult employment at 59 percent.
QI GDP sharply downward to -2.9%.
GDP in 2Q will be >2% (FactSet consensus is +2.9%)
That being said it’s stupid to say that “sluggish growth” = “sturdier”...
Also housing is a bell-weather for the economy but as a portion of GDP it’s ~ 17% (~5% construction + ~12% housing services)
Prior to the numbers being released first quarter, the talking heads all said it would be slight growth.
I’m betting on <2%, and I’m betting on the adjustments having it end up at .5% or so. I don’t see growth (gut feel), and I think ObamaCare is still causing a huge hesitancy.
My guess is the headline number on Wednesday will be +3.0% - ultimately revised down to +2.3%. The jobs numbers the last 3 months point to >3% growth.
Jobs growth is illusory...no income better than unemployment and sometimes worse ..
These numbers are all heavily massaged, I think we have probably been in recession for years and nobody wants to admit it
It would be called a depression and homeless stories would dominate the news. Death toll in Iraq/Afghanistan would be on the front page daily along with gas price and stuff.
Crazy Germans... ;-)
Deutsche Bank Strays From The Wall Street Heard And Predicts A Massive GDP Report
On Wednesday, the Bureau of Economic Analysis will release its first estimate of Q2 GDP.
The average economist on Wall Street is looking for 3.0% growth, after the 2.9% drop in Q1. Citi, Barclays, Nomura, Goldman Sachs, and UBS are among the big names forecasting between 2.9% and 3.1% growth.
Deutsche Bank’s Joe LaVorgna is sticking his neck out, predicting the figure will come in at 4.2%.
In a new note, the LaVorgna explains why there’s a good chance that estimate will prove low: it assumes a conservative rate of productivity.
Productivity is defined as GDP over hours worked. Recent data suggests Q2 hours climbed at a 3.8% annualized rate. Assuming a 4.2% GDP rate, we get productivity growth of 0.4%. But major declines in productivity are often followed by a snapback the following quarter. And data show productivity fell 5.8% in Q1. That could yet be revised even lower.
The Germans are crazy....but they have a beautiful country.
I’m just not confidant in this part-time employment/low participation economy that consumer spending can be all that exciting. Plus the spending that does take place for financially struggling lower middle class has to all be from cheap imported stuff.
I’m puzzled about ObamaCare, but it boils down to less spending on healthcare in that disastrous first quarter. How could that have improved that much?
I assume these banks know what they’re saying, but weren’t they all predicting growth instead of contraction the last quarter?
Three things really impacted 1Q -
1) Very harsh winter
2) Screwy Obamacare accounting in the GDP number
3) Timing of Easter
The last time Easter was that late here was also negative GDP. Timing pushes “normal” 1Q spending into 2Q.
Another positive point was UPS shipment data today. Domestic package volume up 7.4%. They touch almost all aspects of GDP.
The Pbamacare stuff is still a mystery as to exactly how it’s counted in GDP.
I can tell you why UPS is up. Because country people like me aren’t driving to the city to spend money.
That means gas stations, restaurants, and impulse buying didn’t happen for me they way they normally would have.
E-commerce is up BT the vast majority of UPS shipments are commercial not resi. Combine that with increases in NDA, International export package and freight forwarding and LTL. It’s a far far more complex story that just e-commerce.
(Full disclosure - I worked for UPS for 8 years in Supply Chain and Corporate office)
Yay UPS! It’s at the point that the UPS driver and I chat. We’ve had the same driver on our route for years now. Good guy. I probably do half my department-type shopping via internet and UPS.
In any case, growth will be less than 2% and I’m thinking the 3rd adjustment will have it at .5% or so. Businesses retooling and restocking is not commerce. It’s killing time while little is happening.
With 3/4 of the newly employed for years now making minimum wage in part-time jobs, there isn’t a lot of spending going on.
The balance of trade is on your side, though, with decreased oil imports. That should mean we aren’t subtracting as much on that negative balance.
The books are cooked. :>)
Last quarter, it turned out to be down 3%.
As compared to what?
Thanks for your comments. The US economy is resilient often in spite of government policy. The recovery hasn’t been strong, and is regional so may areas are in recession. It really doesn’t ‘feel’ like recovery to many. And its nowhere near its potential for political reasons.
Exactly right! It could be so so so much better but this President has created the most anti-business environment in history. And in spite of that there are a lot of positives (long way to go). That is the American resilience of which you speak.
Also 1Q14 revised to -2.1%
At the end of the day we are looking at 1.5-2.0 annual growth. Growth but weak growth. Where we have been for the last few years: Tallest midget economy - Worst recovery in US history.
Was last quarter of 2013 at 4%, so economy retracted 2.9% from that? Do I have that right?
4Q13 was also revised up but the number are year-over-year not sequential.
There has to be a previous number from which the GDP contracts to show that it has fallen or from which it expands to show that it has risen.
Wouldn’t that be the previous quarter’s number?
When they revise their data later this morning you will see it go up. The headline numbers though are YOY not sequential.
In 2 quarters of decline, for example, the 1st quarter fell from the previous 4th quarter, and the 2nd quarter fell even more from the 1st quarter number. That would give you an official pattern of falling.
Am I correct?
BEA defines a recession as two consecutive quarters of negative YOY growth.
If a hypothetical year ended at 15,000,000,000,000, and the first quarter of the next year ended at 14,700,000,000 then that would be a 2% decline.
If the 2nd quarter of that hypothetical year also ended at 14,700,000,000 would that also be a 2% decline from that 15,000,000,000,000? Or would it be zero growth, zero decline since it would be the same number?