On Wednesday, everyone on Wall Street will be talking about the weather.
No, it’s not going to snow. But snow will be important to the discussion because Wednesday is when the Commerce Department will release its advanced look at the nation’s gross domestic product (GDP) for the first three months of 2014.
And the GDP is going to be awful. The only debate right now is about the degree of awfulness.
The consensus is that the nation’s economy grew at an annual rate of just 1 percent during this year’s first quarter, down from 2.6 percent in the fourth quarter of 2013. But I don’t think it would shock anyone if there hadn’t been any growth at all in January, February and March — in other words, if the economy contracted instead of expanded.
Under normal circumstances, annualized growth of only 1 percent would begin speculation that the US is heading into another recession.
But the apologists for this bland economy on Wall Street won’t have any of that sort of talk. The weather, they’ll say Wednesday, is responsible for the lousy first quarter. And if the second quarter also comes in soft, they’ll have an excuse for that too. (The problem in the Ukraine seems a handy one.)
The weather cop-out will also be important to the Fed when its policymaking committee meets this week and decides to cut back more on the poisonous money-printing policy known as quantitative easing. A slowdown in growth isn’t really convenient for a Fed that needs to tighten monetary policy. So the central bank’s governors will probably sound more like meteorologists and point to snow as the problem.
To be honest, the weather didn’t help. But it probably didn’t hurt as much as the apologists want to believe. Have you ever heard about online shopping? Well, the weather would have had no effect on people ordering online and having stuff delivered to their doorstep.
And for every dollar consumers didn’t spend, how much extra money was spent by towns in weather-ameliorating activities? I don’t know the answer to that, but many city and towns were over budget this winter removing snow, putting down salt and paying workers overtime.
Those costs would have added to economic activity, not taken away from it.
But I am feeling generous today, so let’s not quibble over how much the weather hurt economic growth. I won’t even get into the fact — mentioned many, many times in this column — that the government is boosting reported economic growth by offsetting it with an artificially low inflation rate.
Nope, won’t mention that.
Let’s just look at how the 1 percent growth that might be reported on Wednesday and the 2.6 percent annual growth that was reported in the last quarter of 2013 stack up historically.
According to the Commerce Department, the average annual rate of GDP growth in the US economy from 1929 through 2007 was 3.5 percent. That number is adjusted for inflation, as GDP always is. More recently, from 1992 through 2008 the US had the same average rate of growth — 3.5 percent a year.
So, even the fourth quarter’s 2.6 percent growth is miserable by historical standards. Here’s a little more perspective — in only 5 of the 28 quarters since the start of our financial problems in 2007 has the GDP exceeded the historical average.
The last time that happened was in the third quarter of 2013, when annualized growth hit 4.1 percent. And that spike was mainly because companies were rebuilding their inventories. This inventory rebuilding will cause growth in subsequent quarters to decline as companies inevitably work off their stockpiles.
And, remember, all of this mediocre growth is happening despite the fact that government spending is still breaking the bank and the Fed has maintained interest rates so low that they are changing the dynamics between rich and poor.
With economic growth like this, is it really any wonder that President Obama’s popularity is extremely low? Is anyone surprised that most Americans still think the nation is in a recession? Does everyone now understand why job growth isn’t up to snuff?
That’s why I predicted early this year — and will again now — that the only thing important during the midterm congressional elections this November will be the economy. Not health-care reform, or Ukraine, or some presidential faux pas.
The economy will be the only important issue. And if my investigation into the fabrication of economic statistics plays out like I think it will, that will put the anemic economy into even sharper focus.
Will the US economy ever get back to its historical growth? Is the current generation of workers going to have to accept the fact that opportunities will be substandard and salary growth below normal?
In other words, is the US about to become a second-rate economy, like so many in Europe?
I don’t know the answer to those questions, and I’d rather not wait to find out.
So my suggestion: Since monetary and fiscal policy has been gutted by the economic malaise, we need to try something new.
We need to change the rules on how people can access personal retirement accounts like IRS, 401(k)s and Keoghs. We need to let people withdraw some of their wealth and spend it on houses, cars or whatever else will cause a trickle-down effect on the whole economy.
We need the laws on these retirement accounts changed before it is too late.