Last Friday's release of the 1st Quarter GDP report featured a return to decent growth after Q4's drop to 0.4%. Quarterly growth for January-March 2013 was estimated at 2.5%, and a lot of the patterns we've seen over the last 11 quarters of growth continued with this report.
First, inventories added just over 1% to GDP after taking away 1.5% at the end of 2012. This more than made up for the 2.1% overall difference in GDP from Q4 to Q1, as Q4 growth without inventories was just over 1.9% and Q1 actually fell to just under 1.5%. That being said, that 1.47% number isn't out of the ordinary for recent time, as GDP-final sales has remained consistently in the 1.5% to 2.5% range for the last 2 years.
Another repeating pattern was strong private sector GDP that was somewhat muted by cutbacks in the public sector. Private sector GDP stayed at a year-over-year growth rate of just below 2.7%, but the goverment side had a drop in real GDP of a shade under 0.9%, so overall year-over-year growth is stuck at a decent-but-not-great 1.8%. These next two pictures will show how we've had a steady climb in private sector output in contrast with the drop over the last 2 1/2 years for government. In fact, government GDP is at its lowest level in the last 5 years.
On the down side is another continuing trend- where the rising GDP hasn't translated into increases in income and wages. In fact, real personal income and real disposable income fell in Q1 2013- personal income by 1.5% and disposable income by 1.3%. Yes, some of that is a one-quarter fluke, in a bounce-back from huge increases that resulted at the end of 2012 due to many people and corporations cashing in dividends and stocks to avoid the chance of higher tax rates as the fiscal cliff neared. But the year-over-year numbers still lag GDP growth.
Inflation-adjusted change, Q1 2012- Q1 2013
Private GDP +2.67%
Overall GDP +1.80%
Personal income +1.08%
Disposable income +0.88%
It illustrates again that our real economic problem is the fact that growth has not (and will not) trickled down to increases in income and wages. That and government budget cuts continue to keep a lid on our growth, making the recovery a slow and steady one instead of a noticeable boom. Why we continue with this fallacy of austerity is foolishness, and not just because of how Colbert clowned the Reinhary-Rogoff paper last week and took the dishonesty of austerity to the masses.
Look at these headlines from the last couple of days.
U.S to pay down debt for first time since 2007.
5-year Treasury note under 0.70%, 10-year closes at 1.67%
So explain to me why we're worried about deficits and debt over raising economic growth? The markets sure aren't worried about debt-fueled inflation, so instead of worrying about bond vigiliantes that don't exist, why not try to get even more people back to work and getting paid. Yes, we're much better off than we were 4 years ago, but there's still a long way to go, and we need the gains to go to the 93% of us who haven't been getting it so far.