America’s Potemkin Economy
That the US economy has stopped shrinking is certainly good news. But what kind of recovery is this? Strip out Cash for Clunkers and 3Q GDP growth came in at 1.6 percent. Also strip out slowing inventory cuts and GDP would have been just 0.6 percent. Then you have a report that the WH has overestimated the number of jobs created by the stimulus.
More from economist Robert Brusca:
1) But the fact is that inventories are still being cut, not being built up. Although less inventory cutting is a technical boost to GDP the fact of cutting tells us that the economy has not yet turned any corner very sharply.
2) Consumer spending spurted at a 3.4% pace this quarter, spurred important by cash for clunkers. But that program has come and gone and spending levels have SUNK BACK. So consumption is not yet on a strong sustainable expansion path. … Cash for clunkers carried the quarter. It’s gone in Q4 and spending levels will recede, with GDP growth taking a hit. Will other spending pick up and compensate?
3) Business investment spending was a net negative this quarter and commercial real estate is under pressure – it will be no source of growth. Still business spending on equipment and software turned positive for the first time in six quarters.
4) Government spending rose by 2.3% the fifth highest rise in the last seven quarters. This is not a very good return on our stimulus monies spent. About three-quarters of a trillion dollars has been spent and with no discernable impact on GDP or on jobs.