What may become the most significant news economic news of 2014 was nearly ignored by the political-media establishment.
As the chart shows we were already suffering through the weakest of the ten post-recession economies or “recoveries” since the government began issuing quarterly GDP reports in 1947.
When the May 29 revision showed the economy contracted by 1% Administration officials blew off the news as insignificant, a temporary blip due to winter weather. Move along, nothing to see here. But it won’t be so easy to dismiss a 2.9% drop.
Hopefully, the commentators and Administration spokesmen are right, that the first quarter was just a “blip.” But, considering the economic statistics below they seem to be a bit overconfident.
Exactly 265 quarters have passed since the Commerce Department began tracking and reporting quarterly GDP in 1947.
- 225 or 85% of those quarterly reports showed positive GDP growth indicating economic expansion.
- 11 negative (economic contraction) quarters turned out to be starts of recessions
- 19 negative quarters were the second, third or fourth in continuing recessions;
- only 4 negative quarters in 66 years came and went as isolated phenomenon (blips,) not followed by a recession. Three of those were before 1960.
So, a negative quarter is unusual, not a routine event. A negative quarter that isn’t part of a recession is extremely unusual. Every recession since 1947 was started with the first of several negative GDP quarters. Yet we’ve seen no sense of concern over this ominous economic indicator from the Administration or the media.
Did a recession start in the first quarter? The National Bureau of Economic Research, Business Cycle Dating Committee, the body whose judgement economists of all stripes respect, determines – in hindsight after months of analysis – when recessions began and ended. The committee’s definition of recession:
A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
We’ve already seen drops in GDP, real income, production and sales. But so far the Labor Department has not reported the net job losses that typically, but not always begin about the same time that GDP turns negative. That is one reason to hope that the first quarter was indeed just a blip.
President Obama certainly has not altered his agenda in any way to head off a possible recession. Employers are still preparing for increased expenses associated with hiring due to the Obamacare employer mandate, scheduled to begin at the end of the year after being postponed twice. The President recently announced he will “fight climate change” with sweeping new restrictions on the coal fired power plants that supply nearly half of the nation’s electricity. The resulting spike in energy costs will function as a sweeping new penalty on American industry. The only possible result is downward pressure on GDP and fewer jobs.
If the first quarter of 2014 turns out to be the beginning of a new recession – and based on history the odds favor such an outcome – the President will likely claim, as he has during each of his Administration’s crises and scandals, that he had no warning and bears no responsibility. But the truth will be that his big government initiatives will be to blame both for the anemic, nearly jobless recovery we’ve seen since the end of the 2008-09 recession, and for the new 2014 recession.