Unemployment could stay high as US economy slows
Photo
In this Tuesday, May 1, 2012, file photo, worker Maria Contrero, of Boston, removes an elite running shoe from a sole press during the assembly process at the New Balance Athletic Shoe, Inc. factory in Boston. A U.S. economy that plodded along in the first three months of the year likely grew even less in the April-June quarter. And most economists no longer think growth will strengthen much in the second half of 2012.
WASHINGTON — High unemployment isn't going away — not as long as the economy grows as slowly as it did in the April-June quarter.
Weak consumer spending held growth to an annual rate of just 1.5 percent, even less than the 2 percent rate in the first quarter. And few expect the economy to accelerate in the second half of the year as Europe's financial woes and a U.S. budget crisis restrain businesses and consumers.
The growth estimate Friday from the government suggested that the U.S. economy could be at risk of stalling three years after the recession ended. Economists generally say even 2 percent annual growth would add only about 90,000 jobs a month. That's too few to keep up with population growth and drive down the unemployment rate, which is stuck at 8.2 percent.
The figures came in the Commerce Department's quarterly report on gross domestic product. GDP measures the country's total output of goods and services, from the purchase of a cup of coffee to the sale of fighter jets.
"The main takeaway from today's report, the specifics aside, is that the U.S. economy is barely growing," said Dan Greenhaus, chief economic strategist at BTIG LLC. "It's no wonder the unemployment rate cannot move lower."
Sal Guatieri, senior economist at BMO Capital Markets, expects the unemployment rate to end this year — and next year — at 8.3 percent. He said he foresees no decline in unemployment because of how tepid he thinks economic growth will remain: 2.2 percent for all of 2012 and 2 percent for 2013.
Stocks rose as investors shrugged off the sluggish U.S growth and focused instead on pledges from European leaders to preserve the union of the 17 countries that use the euro. The Dow Jones industrial average closed up more than 187 points. Broader indexes also jumped.
The lackluster economy is raising pressure on President Barack Obama in his re-election fight with Mitt Romney, the presumptive Republican presidential nominee. But few think the Fed, the White House or Congress can or will do anything soon that might rejuvenate the economy quickly. Many lawmakers, for example, refuse to increase federal spending in light of historically large budget deficits.
No president since Franklin D. Roosevelt, in the depths of the Great Depression, has been re-elected when the unemployment rate exceeded 8 percent. Presidents Jimmy Carter and George H.W. Bush were ousted when unemployment was well below 8 percent.
Polls show that management of the economy is the only issue on which those surveyed express more confidence in Romney, with his business background, than Obama.
Glenn Hubbard, economic adviser for Romney, said Friday's report largely matched economists' expectations.
"But those expectations themselves and the report itself were actually quite disappointing," Hubbard said. "At that pattern, the economy simply will never return to full employment."
Alan Krueger, chairman of the White House Council of Economic Advisers, noted that the report showed the economy grew for the 12th straight quarter. Still, Congress could strengthen growth and job creation by adopting Obama's plan to extend expiring tax cuts for all except the wealthiest Americans, Krueger said.
Republicans want the tax cuts extended for all Americans.
The 1.5 percent growth rate in the second quarter was the weakest since GDP grew at a 1.3 percent rate in the July-September quarter last year. And it shows the recovery is gaining no momentum.
After shrinking 3.1 percent in 2009 in the midst of the recession, the economy grew 2.4 percent in 2010. Last year, growth slowed to 1.8 percent — roughly the same meager pace at which the economy expanded in the first half of this year.
Even in normal times, such growth rates are subpar. They're especially weak for a recovery that follows a deep recession, when growth is typically much stronger than average.
Annual economic growth of 2.5 percent to 3 percent is needed to create enough jobs just to keep up with an expanding workforce. Healthier growth of 4 percent or more is needed to reduce the unemployment rate significantly.
The government makes three estimates of GDP for each quarter. Each revision is based on more complete economic data.
The sluggish growth rate could make the Federal Reserve more likely to announce some new step after it meets next week. But Paul Dales, senior U.S. economist at Capital Economics, doubts the Fed will act at the July 31-Aug. 1 meeting.
Many economists instead think the Fed will launch another round of bond buying at its September policy meeting. The aim would be to drive long-term interest rates lower and encourage more borrowing and spending.
In the second quarter, GDP in current dollars rose at an annual rate of $117.6 billion to $15.6 trillion.
Growth was weaker mostly because consumer spending slowed to a growth rate of just 1.5 percent. That was down from 2.4 percent in the first quarter.
Americans bought fewer autos, computers and other long-lasting manufactured goods. But money spent on services, which represents about two-thirds of spending, rose in the April-June quarter.
As they spent less, Americans also saved more. The savings rate reached 4 percent, up from 3.6 percent in the first quarter.
The savings rate reached a low of 1.5 percent in 2005, a year when soaring home prices made consumers feel less need to save. The rate climbed to 5.4 percent in 2008 as the financial crisis and recession squeezed Americans.
Nigel Gault, chief U.S. economist at IHS Global Insight, said consumer spending will likely remain subdued in the second half of the year. He thinks it will grow at or below a 2 percent annual rate.
Gas prices have stopped falling and have even started to rise in recent weeks. And this summer's severe drought is expected to push food prices up toward the end of the year.
"There is really no reason to see us pulling out of this malaise any time soon," Gault said. "I am not calling for a recession, but I am calling for weak growth."
The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009.
Until a few weeks ago, many economists had been predicting that growth would accelerate in the final six months of the year. They pointed to gains in manufacturing, home and auto sales and lower gas prices.
But threats to the U.S. economy have left consumers too anxious to spend freely. Jobs are tight. Pay isn't keeping up with inflation. Retail sales fell in June for a third straight month. Manufacturing has weakened in most areas of the country.
Fear is also growing that the economy will fall off a "fiscal cliff" at year's end. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement.
All that is making companies reluctant to expand and hire much.
The Commerce Department also revised its growth estimates for the past three years. Those revisions showed that the economy contracted 3.1 percent in 2009, slightly less than the 3.5 percent previously reported. Growth in 2010 was put at 2.4 percent, down from 3 percent, with growth in 2011 at 1.8 percent instead of 1.7 percent.
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Associated Press Staff Writers Christopher S. Rugaber, Paul Wiseman and Tom Raum contributed to this report.
Aug 5, 2012 at 10:35 a.m.
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I Don't see how the economy is soooo bad. Every time I am out at a store or a mall, it seems to be packed full of people spending quite a bit of money. I even tried to get a hotel room in the dells and a few other cities, and every single hotel in the Dells was completely booked. Every restaurant I go to seems to be completely packed with people, sometimes with lines out the doors. What recession?!?
Aug 2, 2012 at 9:55 a.m.
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http://www.reuters.com/article/2008/01/0...
CRA loans mostly stayed with the originating banks, and were not bundled. Not just my opinion, but backed by the facts.
Aug 1, 2012 at 11:33 a.m.
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CRA is the root cause of the problem -- combined with organizations that pushed the banks to make the loans. That drove the dirvative markets to bundle and off load the risky loans. If you want to look (meaning the far left will ignore it because it does not suit their ends/means test), then you will simply blame others (sound familiar Mr. Oblamer). The bubble was created by the CRA, by the banks wanting to support people that really met the requirements and by community organizers like Obama that pushed lending institutions to make the risky loans. Then it all collapsed, which is what the marxist left wanted to happen.
If they succeed and the military cuts come as planned -- another 1 million to 2 million jobs will be lost. WARN notices have been relieved (even though its the law of the land) because they would be issued just prior to the election. Talk about a corruptive process. The left will do anything they have to -- to remain in power, to control the money -- they have absolutely no regard for those they damage or hurt on the path to remain in power. This could be the end of the progressive movement if people would wise up and see what is being done to them
Aug 1, 2012 at 10:22 a.m.
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http://blogs.reuters.com/felix-salmon/20...
"The fact is that the CRA did NOT encourage banks to extend the kind of toxic loans which ended up being such an important component of the financial crisis. Indeed, most of those loans weren`t made by banks at all- they were made by UNREGULATED subprime lenders who had no CRA responsibilities whatsoever."
Aug 1, 2012 at 10:10 a.m.
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The people targeted by the CRA were denied loans when others with the same, and similar credit were given them. That was the purpose of the program. As for Solyndra, over a billion and a half of private money also went into it, 3 times as much as the Bush and Obama governments guaranteed loans for.
Aug 1, 2012 at 9:35 a.m.
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"Show me where any lender went to court to not have to make loans to individuals with no ability to repay."
Of course, there is no such regulation. There is a regulation, however, that requires banks to make riskier loans than they otherwise would have. It is called the CRA.
That is the whole point of the CRA: banks don't like to lend money when their odds of collecting outweigh the interest income they are likely to earn (because it's their money). Much as why Solyndra couldn't get a loan from people with their own money at stake and had to rely on the government, to put it in terms you can relate to.
If the people targeted by the CRA were good credit risks, banks would lend to them. They aren't so they don't. If that weren't the case, there would be no need for the CRA. Duh!
Of course, you lefties know this, but purposefully twist the truth through irrelevant questions. I'm surprised the Koch brothers haven't entered the discussion yet.
Jul 31, 2012 at 11:52 p.m.
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http://www.cato.org/pubs/regulation/regv...
Jul 31, 2012 at 10:20 p.m.
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Center for Community Capital, University of North Carolina.
CRA Did Not Cause Foreclosure Crisis, "The claim that the CRA led to the foreclosure crisis is a falsehood that persists despite irrefutable evidence to the contrary and repeated attempts to correct the misperception".
Percentage of home mortgage debt held by CRA regulated institutions was 74% in 1977, 33% in 1995, and 26% in 2008. Between 2004 and 2006, when subprime lending exploded, CRA regulated institutions made 5.9% of all so called subprime loans that were made.
I guess that makes those who still believe that the CRA was a major culprit "idealogues" as the article says.
Jul 31, 2012 at 10:18 p.m.
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http://gazettextra.com/news/2012/jan/25/...
CRA not to blame.
Jul 31, 2012 at 6:33 p.m.
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As an X lender, CRA did require that a certain % of a Banks loan portfolio had to be made to low income and minority buyers, reguardless of their credit scores. Income and race were required on the loan app. If an applicant did not want to provide (race) that information it was the asked that the lender fill in that information to the best of their ability.
Jul 31, 2012 at 5:01 p.m.
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Show me where any lender went to court to not have to make loans to individuals with no ability to repay.
Jul 31, 2012 at 4:43 p.m.
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http://archive.virginia-organizing.org/a...
"CRA increased "responsible" lending to low and moderate income buyers."
This information has been posted before, but some people don`t want to see it. Show me where, in CRA regulations, or Fannie/Freddie, where it says loans MUST be made to those with no ability to repay them.
Jul 31, 2012 at 4:33 p.m.
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http://www.responsiblelending.org/mortga...
The CRA had stricter criteria for checking income, ability to repay, than private lenders. CRA foreclosure rates are lower than other lenders in areas served by both.
Jul 31, 2012 at 12:32 p.m.
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I would have been happy if Obama could have stabilized Bush's numbers. The Democrats create the problem in the housing market (Community Reinvestment Act), blame Bush for the crash and cause the economy to plummet with bad left wing ideology. Time to make a change to restore hope for America.
Jul 31, 2012 at 12:15 p.m.
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Who's blaming Bush?
The recession just happened to happen while he was president.
The Bush recession.
Not to be confused with the 1990 Bush recession.
Jul 31, 2012 at 12:11 p.m.
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That's your job,
Blamey the Clown.
Jul 31, 2012 at 10:01 a.m.
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"Blaming Obama for everything that is wrong with the economy is idiotic."
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Yet it was okay to blame bush?
Jul 31, 2012 at 9:05 a.m.
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RAF, seriously.
I don't blame Obama for the Bush recession.
I merely assert that is would be absurd to blame Obama for the Bush recession.
Your claim that he bears some responsibility as a junior senator is, at best, a stretch, but plausible.
Blaming Obama for everything that is wrong with the economy is idiotic.
Jul 31, 2012 at 7:47 a.m.
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Bush's unpaid for and completely unnecessary decade long war in Iraq went a long way in contributing to the near bankruptcy of this nation. Then Senator Obama opposed it from the very beginning. "I'm not against all wars. I'm against dumb wars." He did vote a number of times to fund the troops, but that's what a patriotic Senator does when it's clear that cooler heads will not immediately prevail. No need to punish the fighting men and women once they're already in harm's way. In 2007, when there was still no definite timeline for withdrawal, Senator Obama did finally vote to stop funding. The Bush regime was clearly pushing a policy agenda that was unhealthy for the nation for the majority of its 8 years. It is perfectly acceptable to put one man's name to it. He was the leader. It was his watch.
Jul 31, 2012 at 1:12 a.m.
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Gary ignoring Obama has culpability as a member of the Senate prior to being President only shows ignorance. Clearly govt action for years created much of the mess, but for some naming only one person with fault fit a premise at the time (Bush). The same premise those same people wish now to change since the office holder has changed. The shift in position, for those people to include you, paints a very clear picture.
Jul 30, 2012 at 10:41 p.m.
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Obama created the Bush recession.
It is all his fault.
Jul 30, 2012 at 10:36 a.m.
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LoL!
Jul 30, 2012 at 10:17 a.m.
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Still trying to recover from the Bush recession.
Jul 30, 2012 at 9:51 a.m.
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More Rmoney deception with NAACP ad.
.
http://www.youtube.com/watch?v=W0ACjhsKL...
Jul 30, 2012 at 8:19 a.m.
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Romney also knows we don't have 57 states.
Jul 30, 2012 at 8:13 a.m.
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woody at least he wasn't afraid to publicly state what the capital of that country was. Now who was it that was mad at whom?
Jul 30, 2012 at 8:03 a.m.
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Now Rmoney has them ticked off in Israel. Way to go Twit!
.
http://www.businessweek.com/ap/2012-07-3...
Jul 30, 2012 at 7:35 a.m.
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RAF,
Hey, I'm with ya. I'd like to pretend that the GW Bush administration never happened, too. Unfortunately, I do have historical perspective. I have sense enough to realize that the damage done to our economy started with Reagan, even included Clinton, was ramped up exponentially by GW Bush and has been dropped at the doorstep of President Obama. Did he choose to take on the task? For sure. Does Obama's choice to be President absolve GW Bush of any blame for the mess he left behind? Not at all. Has President Obama handled it perfectly? Probably not, but everybody has all the answers after the leader has already made the tough choices, never before. Am I confident that his handling of it has made it easier on the American people than a President McCain would have or President Romney would in the future? Absolutely. Don't agree? Don't vote for him.
Jul 30, 2012 at 7:16 a.m.
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Right RAF, even the worst economic President in history had 3.5% growth and that was Carter. So if Obama is only 1.5%???????????
Is there a category worse then the worst? I guess that means Obama takes the title away from Carter.
Romney now up 5 in the new Rasmussen Poll. The most accuate poll from the 2008 elections.
Jul 30, 2012 at 7:15 a.m.
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http://www.thefiscaltimes.com/Articles/2...
Jul 30, 2012 at 6:50 a.m.
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I served my time woody, during Bush sr. term.
Jul 30, 2012 at 6:45 a.m.
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Obama's campaign is dragging old Billy boy out for speaking at the dem convention. Obama is pulling out all the stops. Must be worried. And Billy boy never turns down a chance to talk. How can one stage hold two such big egos!
Jul 30, 2012 at 4:01 a.m.
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The 1.5% Presidency
Growth stumbles for the third time in this Less Than Great Recovery.
http://online.wsj.com/article/SB10000872...
Jul 30, 2012 at 1:11 a.m.
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"The numbers of those receiving TANF have gone up under President Obama due in large part to the mess of an economy left to him by President GW Bush."
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Yep, still all Bush's fault...LOL
Jul 30, 2012 at 1:05 a.m.
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http://www.youtube.com/watch?v=6Ae2Anha7...
Jul 29, 2012 at 10:55 p.m.
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At least BC didn't base his whole term on starting wars. It sounds like Rmoney can't wait to start a war against Iran. Be sure to sign up first slippery.
Jul 29, 2012 at 9:32 p.m.
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woody, that tops the list as the most idiotic thing on here. President Bush isn't required to show his face, he is not the current president of the United States. He fullfilled his terms, I would prefer to NOT see Billy boy anymore, he just seems to show his cheating face on the news and people treat him as though he was the do all tell all. Not the case. He is as relevant as Gomer Pile.
Jul 29, 2012 at 6:45 p.m.
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I think it's funny that they don't even let Bush show his face...they know who screwed the economy up. Then they blame Obama for not fixing it over night.
Jul 29, 2012 at 6:01 p.m.
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Oblamer, you are absolutely right about
everything.
Everything is Obama's fault.
Everything was perfect before Obama and
everything will be perfect if Obama is gone.
You are a GD marvel of modern science
and we are all the better for it.
Jul 29, 2012 at 4:52 p.m.
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This is the Reaganesque USA of every man/corporation for himself. The New Deal USA of safety nets and public good has been eroding for the past 30 years. But worse than that, we now have private profits with socialized losses for the big players. So not only do the big banks/corporations outsource and offshore, they make you pay for it with tax breaks and bailouts. It's nice to be rich in America (and "offshore" your bank accounts!).
Jul 29, 2012 at 4:04 p.m.
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"Pestilence and gluttony are the sisters of the Democratic Party..." Better than the marrying cousins of the Republican party, ignorance and absurdity.
Jul 29, 2012 at 3:29 p.m.
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Here's a little history lesson for ya, Oblamer. I doubt it's a subject that you were any good at in school considering all your information seems to come from right wing commentators and Ted Nugent. Anyway, it should set you straight on welfare, which actually ceased to exist in 1996:
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In 1992, Bill Clinton was elected president promising to "end welfare as we know it," and in 1994 a Republican Congress was elected that was determined to change the existing system. On August 22, 1996, Clinton signed the Personal Responsibility and Work Opportunity Act, which ended the welfare entitlement and replaced it with a new block grant providing $16.5 billion per year to states to assist the needy.
The new program, called Temporary Assistance for Needy Families (TANF), differed from its predecessor in a number of important ways, including:
Eliminating the Welfare Entitlement: Recipients are no longer guaranteed welfare benefits based on eligibility. The 1996 law also eliminated a child care guarantee for welfare recipients, but provided increased funding ($13.9 billion over six years) for child care through a newly created Child Care and Community Development Block Grant. The 1996 law did not affect Medicaid or food stamp eligibility, though critics contend that links between these programs have resulted in numerous recipients being denied Medicaid and food stamp assistance.
Establishing Work Requirements: TANF requires recipients to be working within two years of receiving benefits. This general mandate is reinforced by rules requiring states to reach fixed and rising work participation thresholds. By 2002, 50 percent of families receiving assistance in every state must be engaged in work-related activities.
Establishing a Five Year Lifetime Limit on Assistance: To address long-term welfare dependency, TANF placed a five year lifetime limit on assistance, but allowed states to exempt up to 20 percent of such cases for hardship reasons. States are allowed to reduce this lifetime limit below 5 years, and almost half of the states have done so.
Eligibility for TANF assistance is limited to pregnant women and families with children. Within these constraints, however, TANF allows states broad discretion in how they spend their federal block grant money.
Jul 29, 2012 at 3:29 p.m.
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Since TANF was enacted, the number of people on welfare has declined dramatically. By 1999, there were only 7.2 million recipients, including 2.6 million families and 5.1 million children, roughly half the caseload of the 1994 peak. Analysts believe several factors have contributed to this decline, including an improved economy, tougher work requirements, and diversion strategies that have moved applicants directly to work programs. Not only have recipients left the program in higher numbers, but fewer have joined to replace them.
http://www.policyalmanac.org/social_welf...
*
The numbers of those receiving TANF have gone up under President Obama due in large part to the mess of an economy left to him by President GW Bush. The number of average monthly TANF recipients did increase from 2008 to 2010 by about 500,000 people (only .01% of the US population). In 2011 the number of people on the TANF rolls began steadily declining.
Jul 29, 2012 at 2:36 p.m.
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"Let's start with the liberals."
Oblamer, I would really love for you to elaborate on this, but I'm willing to bet that you don't have the stones. You're probably messing your shorts at the very thought of having to stand behind your own words.
Jul 29, 2012 at 1:47 p.m.
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Outsourced, offshored, whatever you want to call it, the jobs are not coming back, at least not jobs that pay enough to live on. Welcome to the global economy! Blaming Obama is ridiculous, this has been happening since Reagan. The tech bubble saved Clinton, and the housing/cheap money bubble sustained Bush through most of his term, but unless we can create another bubble to sustain us a little longer the "American dream" is over. The American people have been sold out by the big banks and multi-nationals. Sad but true.
Jul 29, 2012 at 12:17 p.m.
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Ignorance and arrogance
are the two ugly stepsisters
of the Republican Party.
Jul 29, 2012 at 12:10 p.m.
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Where have you been?
The House is controlled by the do nothing tea partiers
and the Senate is held hostage by filibustering Republicans.
Jul 29, 2012 at 11:15 a.m.
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This is the new normal people. Businesses have learned how to be at least just as productive if not more with fewer employees. Hiring new workers is a capitalist's absolute, emergency last resort. Many corporations use any number of excuses to keep sitting on their money. Whether it's the PPACA, or expiring tax cuts, or even cuts in government spending, there is an arsenal of government actions being touted as causes for "uncertainty" in business. Here's a newsflash for American businesses: if you're looking for certainty from the US government, the four horsemen of the apocalypse are going to show up first.
As a society, we're just going to have to adjust to a permanently high unemployment rate. Advancements in automation technology and the previously mentioned new standard of high productivity with fewer employers has made it clear that there's just too many of us. We're just going to have to start figuring out how to absorb larger and larger percentages of the population that work very little or, in fact, never work at all in their lives. Or we can start coming up with ideas for population control. Perhaps we can ask China about that.
Jul 29, 2012 at 11:05 a.m.
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wislady,
"Our plan worked" was in reference to the Democratic party of the Clinton Era 90s, and, in that FULL & CORRECT context, President was more or less spot on.
Try reading the entire statement made by the President so that when you do spout off, you at least have some idea of what you're talking about.
Jul 29, 2012 at 11:05 a.m.
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wislady,
"Our plan worked" was in reference to the Democratic party of the Clinton Era 90s, and, in that FULL & CORRECT context, President was more or less spot on.
Try reading the entire statement made by the President so that when you do spout off, you at least have some idea of what you're talking about.
Jul 29, 2012 at 10:51 a.m.
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Where have you been? Dems are in, they haven't fixed the high unemployment.
Jul 29, 2012 at 10:45 a.m.
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High unemployment is exactly what the Republicans want.
Their plan seems to be working.
Jul 29, 2012 at 10:35 a.m.
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What do dems know?
Jul 29, 2012 at 10:34 a.m.
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Too bad some of you can't comprehend a complete statement.
Jul 29, 2012 at 10:07 a.m.
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It seems mitt the twit is already talking war against iran. How fun...is that all the repubs know what to do?
Jul 28, 2012 at 8:26 p.m.
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wislady, ‘If You’ve Got a Business — You Didn’t Build That. Somebody Else Made That Happen’ comes in a very close second.
Jul 28, 2012 at 4:13 p.m.
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woody-You're right but we couldn't find anyone who had zero experience with a giant ego, the Dems got the only one.
Jul 28, 2012 at 8:21 a.m.
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"our plan worked"....most ridiculous claim of the Obama campaign.
Jul 28, 2012 at 7:15 a.m.
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...and the repubs pick Mitt the twit as their choice.....nuff said
Jul 27, 2012 at 9:47 p.m.
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Four more months...Four more months...Four more months...Four more months...!
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