The recession that began in the 4th quarter of 2007 continued in the 2nd quarter of this year and is now entering its 4th consecutive quarter.
“Wait a minute!”, you may be saying. “GDP grew at an annual rate of 1.9% this past quarter. How can you call this a recession?” The classic definition of a recession is two consecutive quarters of decline in GDP. But that’s a terrible definition. A much better definition is declining per capita chained GDP – in other words, GDP adjusted for inflation and population growth. If this figure declines, then that means that every American’s share of the economy is getting smaller.
In the 2nd quarter of ’08, per capita chained GDP declined 2.6%. While total GDP grew at an annual rate of 1.9%, inflation rose at an annual rate of 4.2%. So chained GDP fell by 2.3%. And since the population grew during the 2nd quarter by about 900,000 people, or about 0.3%, then add that to the drop in chained GDP for a decline in per capita chained GDP of 2.6%. This was the third consecutive quarter of decline. Many experts expect at least two more quarters of such decline.
By far, the biggest contributor to the decline is the trade deficit. Eliminating the trade deficit would boost GDP by 5.7%. Cutting legal immigration would also boost per capita chained GDP by 0.1% by slowing the growth in the number of “capitas.”
Here’s some key excerpts from the article:
An emergency dose of government stimulus helped the economy grow at a 1.9 percent annual rate in the second quarter …
… Revised data from the Commerce Department released with the second-quarter figures on Thursday showed national output shrank in the final quarter of 2007…
… The moderation in core prices came despite a jump in overall prices of 4.2 percent …
… Payrolls have declined for six straight months, and analysts expect a drop of 75,000 to be reported for non-farm payrolls in July.
And matters are getting worse. Just today, first time unemployment claims rose to 458,000 this week. That’s an annual rate of about 15.5% of the entire labor force applying for unemployment every year.
How bad will things have to get before the government acknowledges that our trade policies are unsustainable?