U.S. Economy Shrinks in First Quarter of 2022
nationalreview.com
nationalreview.com
> The U.S. economy contracted in the first three months of the year, but strong consumer spending and continued business investment suggested that the recovery remained resilient.
...
> In the first quarter, slower growth in inventories shaved close to a percentage point off G.D.P. growth. Companies raced to build up inventories in late 2021 to make sure supply-chain disruptions didn’t leave them with bare shelves during the holiday season. That meant they didn’t have to do as much restocking as usual in the new year.
Similarly, from Bloomberg (https://www.bloomberg.com/news/articles/2022-04-28/u-s-econo...)
> The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%.
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> Together, trade and inventories subtracted about 4 percentage points from headline growth. Government spending shrank, also weighing on GDP. But real final sales to domestic purchasers, a measure of underlying demand that strips out the trade and inventories components, accelerated to a 2.6% annualized rate.
As always: synthesize from multiple news sources.
The definition of a recession is two consecutive quarters of negative gdp growth, so it's funny to call the beginning of a recession a strong "recovery"
That’s not the definition of a recession:
> the often-cited identification of a recession with two consecutive quarters of negative GDP growth is not an official designation. The designation of a recession is the province of a committee of experts at the National Bureau of Economic Research (NBER), a private non-profit research organization that focuses on understanding the U.S. economy. The NBER recession is a monthly concept that takes account of a number of monthly indicators—such as employment, personal income, and industrial production—as well as quarterly GDP growth.
Feel free to provide specific critiques of these analyses. I'm certainly interested to hear your perspective, as the data is complex and COVID has made the world more than a little bit weird.
But snark and scare quotes do little to enlighten.
That said, there are a lot of different signs, indicators, and numbers that suggest that the present economy is not really amazingly wonderful despite how inconvenient that is for the current administration and its boosters like the Times.
Obviously, inflation being really quite high (and going only upward) isn't a great sign.
Low unemployment is a strong indicator, though the fact that the labor participation rate is still at 1970s levels (when the labor force was still much more significantly gendered) is not. Labor participation is increasing slightly, so it's still not all doom-and-gloom, but it's not great. Low unemployment also means that the US is unlikely to be able to get its economy back to growing simply by hiring more people to be productive -- since everybody willing to work already is.
GDP declining is, as discussed, a direct measurement of the decline in the size of the economy.
The widespread "everything shortages" that are plaguing basically all corners of the goods economy is another -- and the fact that a year later the situation is even worse is not promising.
Overall, it's a bit disingenuous to talk about the amazing and stellar economic recovery that's going on. It's much more of an economic teetering-on-the-edge-but-maybe-it-will-stay-on-the-okay-side.
I couldn't agree more! To be clear, I posted those alternative takes not because I buy into them as a complete alternative narrative, but rather to, again, encourage people to synthesize multiple points of view in order to get a more balanced picture.
Your comment actually does a very nice job of summarizing those points of view, so thank you!
I personally think that we might end up like Japan with a permanently low interest rate at the cost of stagnation and continued inflation that destroys the middle class and pushes people on the fringes further.
It's likely that the whole pandemic measures while legitimate in itself, also had a second ulterior beneficiaries, the ability to massively lockdown segments of the population and keep them inside. Looking at the Shanghai and now Beijing lockdown reminds of this yet the cases continue to rise which tells me the primary motive isn't to reduce covid over there. It will take far less to pull off the same thing in free societies, fear portrayed by mainstream media and experts is all that is necessary to keep everybody from participating in mass protests and violence.
It is said that if you do business with authoritarian countries, you start to resemble them and I fear that we are headed towards something like that from all we've seen in the past 3 years especially.
As they say, you can judge a person by the company they keep. This is probably true of any system. You can evaluate a system by that which it is entangled with.
EDIT: Not here to fear monger since people are silently downvoting away. It's one quarter followed by a relatively strong quarter. But inflation issues have been present for a while and is growing worse. World wide conflict between Russia-Ukraine that affects everyone via energy. Concerns about a recession have been in the works for a while now as well. If you have confidence that my fears are unfounded, I'm happy to hear them.
Unlikely until mid-elections. No political camp wants to be the one that stops the music and become the destroyer of wealth of the middle class. Yet the soft landing they keep touting is simply not possible with the amount of money printed.
The fed is at a tough place but if the US dollar loses the faith of other currencies backed by it, it could become a national security issue. Yet the decision maker's continued hold on power is dependent on them delaying it as such for the duration of their term.
Something has to give. $1 in 1992 is now $2 in 2022. It's very possible that it reaches $4 in half that time, possibly even as little as 5 years. This is a very real possibility that stakeholders are dealing with.
Hyperinflation is almost certainly followed by a major world conflict. ex) Weimarch Republic
Nah. The US is still too self-sufficient, even if the US collapses internally as a result of either inflation or political infighting (which is scarily possible, we've seen the first signs on Jan 6th 2021!) there won't be any need for the US to head to an offensive war for resources, space or revenge. The US produce more than enough food, oil and gas to serve the country's demands; the interesting thing will be anything involving computer chips but as long as Japan and South Korea don't get invaded there won't be a need for the US to intervene with its military.
The really interesting part will be China and Russia... but given that Russia gets their ass brutally beaten in Ukraine and most Chinese military designs have strong roots in Soviet and Russian technology, I seriously doubt that China will risk anything more than loud posturing.
In any case I think and hope that nuclear MAD doctrine should be enough to prevent a large scale world wide war.
Xi like Putin is on the edge of the cliff. When strongman fear an uprising, they create external conflicts to mobilize the crowd. For Putin, it was 3 decades of stealing from the Russian state and people with covid decimating it's economy. Similarly for Xi, it is the continued economic growth that legitimizes its power and with the deflation of its real estate industry, zero covid strategy touted by xi, that in turn created an economic fall out, it's do or die for Xi before the 20th party congress in a 4 months or so.
I fear that Taiwan will suddenly find itself in a situation like Ukraine except I do not think the US and its allies will allow China to gain unchecked access to the Pacific ocean by taking Taiwan and its semiconductor production that US military depends on.
The idea of a containment policy was pretty solid and effective (even though the measures taken were sometimes beyond all reasonability), the problem was that the low vaccine efficiency completely imploded that idea with the Omicron mutants.
And now, the Chinese government is in a pretty bad place politically... their choices are a) to admit that the vaccines are shit, allow internationally recognized vaccines and keep containment policy until these have been rolled out b) admit that the containment policy has failed and accept the spread of covid like most Western countries did or c) counteract the improved spreadability and immuno-escape capabilities of SARS-CoV-2 by harsher containment measures.
Neither of these three options are good, and I believe that the fear of Xi's regime to "lose face" will inevitably lead them to option c) as it is the only way that does not force the regime to admit that their decisions have been faulty - the central committee can simply declare lower ranks not following orders are the culprits and so Xi's face is saved.
There is also an addendum - as all three options lead to a severe hit in popularity and correspondingly a threat of the stability of the Chinese government, the regime may decide to invade Taiwan for political gains ("we led the secessionists back into the homeland"). The key question there is if the regime is willing to risk a Russian scale defeat, as unlike Russia China has practically zero experience in military conflict and Taiwan has a direct bilateral defense agreement with the US.
We've had a surreal 2 years where the US is clearly in decline yet the stock market and rampant speculative investing suggest a booming economy. It's been a bit of a fantasy for the property-holding class, while regular people still largely see unstable work schedules, omicron spreading, and crumbling roads/infrastructure.
Fiscal policy is badly needed, along with a big wealth tax to fund it.
https://www.bea.gov/news/2022/gross-domestic-product-first-q...
I'll come back to this in October to say I told you so.
On housing:
https://wolfstreet.com/2022/04/27/mortgage-volume-gets-crush...
You're advising people to sell their homes based on this information you claim to have. If you're not willing to trade on this claim, why should anyone else?
Can a guy just be kind? More news you can use!
https://www.detroitnews.com/story/business/2022/04/25/rocket...
1.4% doesn't sound like much, is this really cause for alarm after how fast we've been growing?
5% growth is when everything is kinda normal and 25% of people/businesses barely get by.
-5% growth is when most people and 75% of businesses/people cannot get by
(all percentages are my gut check estimates but based on some empirical data)