It appears the numbers have been updated from the earlier estimates:
The country’s economic performance in the opening quarter of 2005 was better than first thought, logging a solid 3.5 percent annual growth rate in a new sign of a strong springtime business expansion.
The latest reading on gross domestic product, released by the Commerce Department on Thursday, was an upgrade from the 3.1 percent pace initially estimated for the January-to-March quarter.
”The 3.5 percent pace is really a safe and solid pace for the economy to grow. By that I mean, it is not so fast that you can have an inflationary accident and not too slow to create new jobs,” said Stuart Hoffman, chief economist at PNC Financial Services Group. ”It is right on the economy’s speed limit.”
The higher estimate for economic growth mostly reflected a slight improvement in the nation’s trade deficit, which was less of a drag on growth than the government previously thought. More brisk spending on housing projects also helped.
Good.
Kimmitt
With profits lousy and employment still anemic, I gotta wonder where all this growth is going to.
Jeff
Hah, I just knew the one positive post in about two days was gonna inspire some Democratic wet-blanket to say that the good news really isn’t good.
Don’t worry Kimmitt, it was just one quarter. There’s still plenty of time before the ’06 elections for the housing bubble to burst, or interest rates to skyrocket, or the stock market to crash.
This is the type of thing that, even though I’m leaving the Republican party, keeps me from joining the Democratic party.
Kimmitt
No, there’s been this kind of decent growth for two years; I really am baffled as to what’s going on, and I’m hardly alone in this.
Nash
I don’t think current employment levels are considered anemic by any recognizable standards, Kimmitt. They are fairly solid and have been so. And, I don’t know what profits you are referring to–in a number of industries (e.g., oil, pharma), profits and margins are at all-time highs.
Now, it is demonstrably true that wages have not kept up with productivity growth and the lowest-to-highest wage gap has been getting much wider, so it appears almost none of the profits are going back into paying these workers in proportion to the productivity gains. I think that will come back to bite us, in time.
cminus
We at work have been scratching our collective heads about why employment remains anemic despite robust growth. There are three top guesses:
1. A new employee’s fixed costs (read: insurance, in particular) are high, but the marginal costs (read: overtime) are low. So it makes more sense to have two workers put in 60 hour weeks than to have three workers put in 40 hour weeks. Especially likely for salaried service-sector jobs.
2. Employers don’t believe the economy’s medium-term prospects are that good (the national debt is horrifying and the balance of trade not much better, either of which could mess things up dramatically), so don’t want to hire people they’ll probably have to let go soon after.
3. There are mismatches between what the labor force offers and what employers want. Many of the unemployed don’t have the ability to command the minimum employment terms they’d accept, whether it’s from lack of skills, the expense of commuting from somewhere they can afford to live to somewhere with jobs, or just lower-cost competition from overseas.
Just some theories.
Kimmitt
cminus — yeah, but hours worked isn’t going up either. And even if all this is so, why aren’t corporations posting record profits? Where is that growth *going*?
I don’t think current employment levels are considered anemic by any recognizable standards, Kimmitt.
That’s really not the case. While unemployment is fairly reasonable, we have a fairly significant drop in the employment-to-population ratio which has been more or less sustained — from 64.4 percent in 2000 to 62.3 percent in 2004.
Source: BLS.
Steven
Saw this over at NRO this morning and thought it was interesting.
From Jonah Goldberg:
From one of my economics Hill guys:
Jonah, I thought I might shed some light on your question about possible trends in the size and direction of revisions to GDP data. According to a 2004 study by the Bureau of Economic Analysis of GDP revisions from 1983 through 2004,
Bob
Kimmitt, that growth isn’t in my paycheck, if that helps.
Working people sixty hours is great for pro-family types, too. Never home to see the wife and kids.
scs
Remember George Bush the “miserable failure” from the 2004 campaign? He was supposed to be the “worst president this country ever had”, according to Gephardt and the other Dem candidates, who trotted out any negative economic statistic and blamed Bush for it?
So is he not so bad, now that the ecomomy is not tanking?
All that nasty rhetoric from the Dem candidates drove many centrists like me to vote for Bush. Will the Dems now give him the credit?
Mr.Ortiz
The economic news continues to baffle. I heard one place that the percentage of people unemployed for six months or longer is at its highest level since World War 2. Then I hear somewhere else that states across the country are reporting record high tax revenue from increased wages and sales.
Kimmitt
So is he not so bad, now that the ecomomy is not tanking?
Nash
All that nasty rhetoric from the Dem candidates drove many centrists like me to vote for Bush. Will the Dems now give him the credit?
This is a great example of the #1 most commonly used form of Republican Victim’s Status.
scs translated:
“You were so mean to the poor guy that you just forced me to vote for him. I wouldn’t have voted for him if you hadn’t been so nasty and said such mean things. I didn’t vote for Clinton because no one said anything mean about him, so I wasn’t forced to vote for him.”
sincerely,
A conservative victim.
Nash
And Kimmitt, you are correct–I was misreading “employment levels” as “unemployment levels”. Which, of course, brings up the issue of the category of the demoralized or “no longer seeking employment”.
scs
Nash, I did vote for Clinton and did consider myself a democrat until Bush’s war on terror, which I supported. Your generalities need to be rethought.
And if there had been a pro-war, non-weasly, non-nasty Democrat running , I probably would have voted for him or her, but no such alternative existed.
scs
And Kimmett, I don’t get what the highlighted quote of mine signifies to you. I just want to emphasize that there should be a little credit now, since he got all the blame before.
Kimmitt
That was a post that went weirdly awry is all.