Gross Domestic Product and Industrial Production —

After real GDP averaged 3.25 percent annual growth in the 1990s, the economy fell into a mild recession in the second and third quarters of 2001. This is despite recent Bureau of Economic Analysis revisions that amended the data and now show no decline at that time. The events on September 11, 2001 exacerbated the downturn already in progress. GDP recovered in the first quarter of 2002 and the economy has grown in fits and starts since then. A strong housing market combined with low interest rates fueled consumer spending. The economy soared in the second half of 2003 and into 2004 thanks to tax cuts that gave consumers more money to spend.

 

But while growth slowed perceptively in the first half of 2008, gross domestic product remained positive until the third quarter. Slow employment growth continues to wound consumer spending today. The credit crunch and ensuing financial market woes spread to the real economy and brought growth to a screeching halt. Although oil prices were down from their highs it was too late to save consumer spending and corporate profits and they both sank. According to GDP, the economy emerged from recession in the third quarter of 2009.

 

 

First quarter 2014 GDP slowed dramatically, thanks to dreadful winter weather but the July 2015 annual revisions eased the decline. The economy rebounded in the second quarter of 2014. GDP was up 1.1 percent on the quarter and up 2.6 percent from the same quarter a year ago. On an annualized basis, GDP was up 4.6 percent. GDP increased a revised to 1.1 percent in the third quarter. On the year, GDP was up 2.9 percent when compared with the third quarter in 2013. The economy grew at an annualized pace of 4.3 percent. In the fourth quarter, growth eased to an annualized pace of 2.1 percent. On the quarter, GDP was up 0.5 percent and 2.5 percent from the same quarter a year ago.

 

Once again, weather weighed first quarter GDP in 2015. But this time, there was the West Coast shippers' strike that caused problems as well. However, newly revised data indicate that there was no contraction in the first quarter. Rather, GDP was up 0.2 percent on the quarter and 2.9 percent on the year. On an annualized basis, GDP was revised to an increase of 0.6 percent. Growth rebounded in the second quarter to an annualized pace of 3.9 percent or 1.0 percent on the quarter and 2.7 percent from the same quarter a year ago. The first estimate of third quarter GDP saw growth slow to 1.5 percent annualized or 0.4 percent on the quarter and 2.0 percent from a year ago.

 

Industrial production had its ups and downs in 2012 thanks in part to acts of nature. Hurricane Isaac hit the Gulf coast during the summer and in October output was hurt by superstorm Sandy that hit the U.S. East Coast. Industrial production declined in two of 12 months in 2013 — April and July. Meanwhile, manufacturing output was down three of 12 months in 2013 — January, April and July.

 

 

In 2014, monthly industrial output declined in January, August and December. It advanced in the remaining months. Manufacturing was down in January and August but increased in December.

 

Industrial production continued to languish in 2015. It declined each month through June. In July, output rebounded by 0.8 percent and was up 1.2 percent on the year. Manufacturing output has been down six of nine months in 2015, retreating 0.1 percent in September. On the year, manufacturing output was up 1.6 percent. Manufacturing continues to be hit by slow overseas growth and the strength of the U.S. dollar.

 

Inflation — Inflation continues to run below the Federal Reserve's 2 percent target. In 2013, the CPI was up 1.5 percent and core was up 1.7 percent. Inflation was not a worry in 2014. As the year ended, the overall CPI was up just 0.7 percent on the year while the core CPI was up 1.6 percent. Both indexes remained below the Federal Reserve's inflation target of 2.0 percent

 

 

The overall CPI retreated in January but edged upward in February while core was positive for both months. However, on the year, the overall CPI declined 0.2 percent in January and 0.1 percent in February. Core advanced 1.6 percent and 1.7 percent respectively. In March, the CPI was flat while core climbed to an increase of 1.8 percent on the year. The index continued to be dragged down by energy prices. In April, the overall CPI inched up 0.1 percent but retreated 0.1 percent on the year. Core on the other hand, was up 0.3 percent on the month and 1.8 percent on the year.

 

In May, the overall CPI was up 0.4 percent but was virtually unchanged on the year. However, core added 0.1 percent and was up 1.7 percent from a year ago. In June, the CPI was up 0.3 percent and 0.2 percent on the year while core added 0.2 percent and 1.8 percent from a year ago. In July, the CPI edged up 0.1 percent on the year but slipped 0.1 percent and 0.2 percent in August and September respectively. Core on the hand edged closer to the Fed's 2 percent target. In July and August, core was up 1.8 percent and in September, 1.9 percent from a year ago.

 

With the oil price decline considered a transitory factor for the Fed, the climb in core closer to the Fed's 2 percent inflation objective will be watched carefully for price pressures going forward.

 

Unemployment — The civilian unemployment rate bottomed out at 3.9 percent in September 2000, a rate that had not been seen since January 1970. But with the onset of recession, unemployment climbed especially in the manufacturing sector. Increases in unemployment were mitigated by the mild nature of the recession. Unemployment is typically a lagging indicator and generally increases even after a recovery is in place. Unemployment was on a downward trajectory until July 2006, when it climbed to 4.8 percent after two months at 4.6 percent. The unemployment rate ranged narrowly between 4.4 percent and 4.8 percent in 2007 until December 2007 when it jumped to 5 percent.

 

The unemployment rate climbed rapidly to 10.0 percent in November and December 2009 but eased to 9.7 percent in January 2010 where it was for three months before it resumed its downward track. Since the beginning of 2012, the unemployment rate has continued to trend downward but with occasional bumps upward. At the end of 2012, the unemployment rate was 7.9 percent. It continued to decline in 2013 and ended the year at 6.7 percent. The downward trajectory continued into 2014, ending at 5.6 percent.

 

 

The unemployment rate edged up to 5.7 percent in January thanks to an increase in the size of the labor force. It declined to 5.5 percent in February and remained at 5.5 percent in March. It slipped in April to 5.4 percent but increased once again to 5.5 percent in May thanks to more people entering the labor force. In June and July, the unemployment rate was 5.3 percent. It dipped to 5.1 percent in July and August and down to 5.0 percent in October.

 

Employment plummeted for 22 consecutive months reaching a crescendo in January 2009 when 818,000 jobs were lost in that month alone. The employment declines remained massive even as they steadily declined in size. Employment finally bumped up in March, April and May of 2010. The improvement in employment continues to be slow with the number of new jobs fluctuating from month to month rather than showing the steady and rising increases that were typical of previous recoveries. Employment has increased in every month since October 2010. In 2012, the economy added 2,193,000 jobs. The U.S. added 2,331,000 in 2013. In 2014, the U.S. added 311,600,000 jobs.

 

 

The pace of job creation slowed in January to 201,000 but picked up again in February with a gain of 266,000. However, March disappointed with a gain of 119,000 jobs. In the first quarter of 2015, the economy added 586,000 jobs. But employment growth picked up in the second quarter. The economy added 187,000 in April, 260,000 in May and 245,000 in June. Second quarter employment was up 692,000.

 

Job growth was above 200,000 in July at 223,000. However, it weakened in both August and September to 153,000 and 137,000 respectively. Third quarter declined to only 513,000. However October jumped by 271,000 with strength throughout the report.

 

Merchandise trade — The United States reliance on foreign goods intensified in the 1990s, although export growth improved modestly during the period too. In good economic times, imports help alleviate demand pressures and therefore help curtail price inflation for goods and services. In downturns, a decline in demand for goods also leads to a drop in import demands so that foreign producers feel the effect of a U.S. downturn and the negative impact on domestic producers is mitigated to some extent. Investors overseas have mixed feelings about the U.S. trade deficit. On one hand it means that U.S. consumers continue to buy their exports, which in turn stimulates their domestic economies.

 

 

The January 2015 deficit was $43.6 billion. The deficit narrowed to $38.5 billion in February. The deficit exploded in March to $52.2 billion thanks to distortions caused by the West Coast port strike but narrowed to $42.3 billion in April as things normalized at the ports. The deficit was $42.5 billion in May. The deficit in June jumped to $45.2 billion but eased to $41.8 billion in July. It soared to $48.1 billion in August but eased substantially to $40.8 billion in September.

 

Exports have been hit by the strong U.S. dollar but advanced 1.6 percent in September while imports declined 1.8 percent, still reflecting the decline in petroleum prices.