I don't write about the economy as much as I used to. It's been three long years since the NBER announced that the Great Recession ended in June, 2009. When I started writing DOTE in January, 2010, the recession had been officially over for 7 months. During the first two years of DOTE I thought it was important to tell people that the economy was not going to come back and tell them why it would suck for many years to come, if not forever.
But I don't have to fight that battle anymore because the so-called "bears" have already won it. The "green shoots" talk, the mindless optimism, the obligatory hope and all the other propaganda we got from economists, politicians and the mainstream media was simply bullshit. I knew it, some of you knew it, and I wanted make sure that others knew it too. That's all over now, or should be. The jury is in. What's the verdict?
Even those issuing the official government data are having trouble hiding the fact that the economy sucks. Today we got the May jobs report from the Bureau of Labor Statistics. Here's Bloomberg's take on yet another dismal report. I'm using that story because it quotes the consensus forecast.
American employers in May added the smallest number of workers in a year and the unemployment rate unexpectedly increased as job-seekers re-entered the workforce, further evidence that the labor-market recovery is stalling.
Payrolls climbed by 69,000 last month, less than the most pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined...
Estimates of the 87 economists surveyed ranged from increases of 75,000 to 195,000 after a previously reported 115,000 rise in April. Revisions subtracted a total of 49,000 jobs to payrolls in March and April.
April was revised down to 77,000 jobs gained from 115,000 and the number the BLS came up with for May was worse than the most pessimistic estimate in a Bloomberg survey prior to the report. The clueless optimists are still out there and they're still doing what they do best, which is get everything wrong.
Weekly jobless claims rose to 383,000 and the 4-week moving average now stands at 374,500. Do you remember when claims started dropping earlier in the year? Everybody got very excited! Simultaneously with the declining weekly claims, the BLS was busy lowering the unemployment rate all the way down to 8.1%. (It's 8.2% now.) Sometime during this burst of optimism about our economic prospects I wrote that we should wait and see about the jobless claims trend. I thought it was a mirage and couldn't last. I was right.
And finally, the BEA revised real (inflation-adjusted) GDP for the 1st quarter. Downward, of course. Rick Davis of the Consumer Metrics Institute keeps on top of this stuff, so I rely on him to tell me what's going on. After the revision, I got an e-mail from Rick.
In their second estimate of the first quarter 2012 GDP, the Bureau of Economic Analysis (BEA) lowered the annualized rate of U.S. domestic economic growth to 1.88% (down about a third of a percent from the 2.20% previously reported), and now more than a percent below the growth rate for the fourth quarter of 2011. This revision to the prior month's report does not reflect actual monthly changes in the economy, but rather another month's improvement in the BEA's understanding of what was happening during the prior quarter..
The BEA continued to use "deflaters" that at first glance seem to understate the inflationary experiences of the public. To correct the "nominal" data into "real" numbers the BEA assumed that the annualized inflation rate during 1Q-2012 was 1.65%.
As a reminder, lower "deflaters" cause the reported "real" growth rates to increase — and once again very low seasonally adjusted BEA inflation "deflaters" have contributed a significant positive bias to the headline number.
In fact, if the raw "nominal" numbers were instead "deflated" by using the seasonally corrected CPI-U calculated by the Bureau of Labor Statistics (BLS) for the same time period the economy would have been reported to have been contracting at a -0.13% annualized rate.
If the BEA hadn't used a custom "deflator" which disregards CPI-U inflation, which itself is understated, and thus overstates GDP, the economy would have shrunk at an annualized rate of 0.13% in the first quarter. Those who have been predicting a recession can't be pleased about this development. How can you be right about predicting a recesssion if the government won't admit that it's happening?
So there you have it, my brief overview of the American economy. There's no need to drone on and on about it because the economy looks exactly the way we would expect it to look—the American economy sucks.
Have a nice weekend.
Bonus Video — Lakshman Achuthan sticks with his recession call (hat tip, Mish).