The Bureau of Economic Analysis (BEA) released its first estimate of GDP (gross domestic product) for the 2nd quarter this morning. (Link provided above.) The news is not good, which should come as no surprise. GDP was anemic in the first quarter, at an annual growth rate of 1.8%, and all indications have been that the economy slowed markedly in the 2nd quarter. Now we have verification of that, with second quarter GDP coming in at annual rate of increase of 1.3%.
However, as I’ve said before, what matters most is not the size of the GDP pie, but the size of the slice that’s left for you when everyone sits down at the table. So, when population growth is factored into the equation, real per capita GDP actually declined in the 2nd quarter at an annual rate of 0.5%, falling from $43,191 to $43,132 per person. No wonder the economy doesn’t feel as though it’s in recovery. In per capita terms, we’ve actually begun the 2nd dip of the long-predicted (by me, anyway) double-dip recession.
Actually, the U.S. has been in a continuous recession since the end of 2007, when per capita GDP peaked at just over $44,000 per person.
Here’s a chart of real (adjusted for inflation) per capita GDP:
The biggest reason for this slowing of the economy is detailed in the BEA’s report:
Real personal consumption expenditures increased 0.1 percent in the second quarter, compared with an increase of 2.1 percent in the first. Durable goods decreased 4.4 percent, in contrast to an increase of 11.7 percent. Nondurable goods increased 0.1 percent, compared with an increase of 1.6 percent.
In other words, the consumer is tapped out. No surprise, given that unemployment is sky high and rising. Time and again in recent days I’ve heard economists say that “we’ve got to stimulate consumption.” Bull. Americans are consuming as much as they possibly can. We’ll explode if we consume any more. The real problem is that we’ve given away the production of all the products we consume to foreign manufacturers through our idiotic trade policy. Whose economy would it stimulate if we consume even more? China’s. Japan’s. Germany’s. Not ours.
Mindlessly, the federal government continues to throw fuel on the fire by importing more workers even as unemployment is on the rise, and by crowding more and more people around the table to stare hopelessly at an ever-shrinking slice of pie.
Since Obama took office, I’ve predicted that, if he didn’t take action to fix our trade policy and restore a balance of trade before the stimulus spending ran out, we’d slide right back into recession before the next election. And that’s exactly what’s happening.