GDP Declined in 2nd Quarter, prior to Revisions

[unlawflcombatnt]

2nd quarter 2007 GDP was actually less than originally posted GDP for the 1st quarter of 2007. (i.e., 2nd quarter GDP growth was negative). Once again, however, the BEA (Bureau of Economic Analysis) manipulated the numbers enough to arrive at a positive 2nd quarter GDP growth. The originally published 1st quarter GDP was downwardly revised by a whopping $137 billion, from the original $11,549 billion down to $11,412 billion.


Again, real GDP growth would have declined for the 2nd quarter, had 1st quarter GDP not been downwardly revised. On the 4/27/07 1st quarter GDP report, the annualized GDP was published as $11,549 billion (in chained 2000 dollars).

On 7/27/07, the GDP report put 2nd quarter annualized GDP $41 billion less than the 1st quarter, at only $11,507.9 billion. This would have made 2nd quarter GDP growth -0.355%. Below is a composite chart from the BEA showing the GDP comparisons. The top 2 charts are from the latest report on 7/27/07. The bottom chart is from 4/27/07. The real GDPs for the 1st quarter are underlined in blue (chained 2000 dollars). The current dollar GDPs for the 1st quarter are underlined in red.



Once again, an after-the-fact revision in previously published numbers has been used to falsely 'create' economic growth.

In this case, it seems pretty clear that 2nd quarter GDP growth should have been negative, and that we are now experiencing recessionary GDP declines.

unlawflcombatnt

Economic Populist Forum

[dugggy]

1. That did not fool the stock-market!

It promptly dived after the figures were digested
by the literati.

[unlawflcombatnt]

2. Yes

It's hard for anyone to believe what comes out of the government, including their confabulations about the economy.

The economy has been sinking for quite awhile. The government has done everything possible to obscure it.

More people are starting to catch on.

With a crashing housing market, declining Durable Goods orders, declining real wages, and monthly job growth generally less than the 150K considered necessary to keep up with population growth, it's hard to see how the economy is "strong."

Economic Populist Forum

[Double T]

3. All the bushco economic numbers are bogus; inflation, GDP growth, sub-prime exposure and projected..

losses to the lenders, deficits, job losses, job creation, manufacturing plant closings etc. I would NEVER believe a damn thing this government says about anything; eventually whatever they claim always proves to be untrue.

[unlawflcombatnt]

4. Jobs and other lies

The job situation is another fantasy. Over half the monthly job total comes from "imputed" jobs, not jobs that were actually counted. The addition of "imputed" jobs based on the number of jobs created that the government assumes it did not count, and it is estimated based on the previous year's job growth. Almost by definition, it overstates jobs when the economy is shrinking, like it is now. Without the "imputed" jobs addition, the last 2 months would have shown negative job growth.

Economic Populist Forum

[Greyhound]

13. A question, why is 150,000 new jobs the number when just a couple of years ago

the number was 250,000? Another example of the creeping fudge factor?

[unlawflcombatnt]

23. Yes

Creeping fudge factor is exactly right.

The Corporate news media continues to regurgitate the "solid job growth" soundbite, when it comes in at anything over 100,000 month. How does the jobs created necessary to keep pace with labor force growth go down? Population growth is almost 1%/year, and is increasing, not decreasing.

However, worse than simply lowering the number is the fact that over 100% of the job growth over the last 2 months has been from uncounted "imputed" jobs-- jobs the government estimates were created, but could not be counted.

156,000 "imputed" jobs were added to the June job total number by the infamous business "birth/death" concoction. Again, these are "imputed" jobs, not jobs that were actually counted. Given that the total number of payroll jobs created in June was only 132,000, it means the actual, countable jobs created were -24,000. In other words, the actual number of "counted" jobs was 132K - 156K, which equals a -24K jobs in June. Thus, the number of payroll jobs that were actually counted in June declined by 24K in June.

A discussion of this "birth/death" concoction by the BLS can be found at Mish's Global Economic Analysis.

The longer-term job growth is also obscured by June's concocted payroll employment report. Total employment has only increased 214K for the first 6 months of 2007, from 145.926 million in December 2006 to 146.140 million at the end of June. This is an average of only 36,000/month. At this rate, the annual employment increase would be only 432,000 for the entire year.

unlawflcombatnt

Economic Populist Forum

[enid602]

5. military spending

The real issue here is how can our economy be in a recession when government spending is so high? What will happen when we decrease military spending? We'll have to eventually; our credit is drying up.

[unlawflcombatnt]

6. Military Spending

When we're finally forced to cut military spending, a lot of Defense constractors will sink. Which wouldn't bother me a bit.

[dugggy]

8. Along with a lot of Americans losing well paying jobs

which is the unfortunate part of defense spending
winding down.

My question to Bush is this: How has US benefitted by
the $500 BILLION spent for Iraq invasion? Would that
money have been better spent in re-building the aging
infrastructure, giving incentives to job creators,
research money for all types to keep 1 step ahead of
the world, and subsidize healthcare?

As for the 3500 deaths of soldiers in Iraq, as devastating
as it is for the families, they VOLUNTEERED for the job.
They knew the risks and they accepted it and they served.

[enid602]

10. invest

I'd say that the governments of India, China and Brazil have been smart to invest in manufacturing.

[unlawflcombatnt]

30. Corporate America

Unfortunately, Corporate America has followed their lead, and also invested in Chinese and Indian manufacturing.

[Supersedeas]

19. a Pentagon militaristic economy -- where indefinite war pays

[Progressive Friend]

7. Thanks for posting this!

It should also be noted that the US share of the global GDP is also constantly falling. Based upon the CIA's numbers (Purchasing Parity Power), the US percentage of the global GDP is now below 20%. After World War II, the US share was like 46%.

Is the US really "unconditionally viable" as some like to claim? I don't think so.

[dugggy]

9. The US share of world GDP falling is mainly due to

countries like China, India, Brazil & Russia having
discovered capitalism which has caused their GDP's to
rocket upwards.

Incidentally, did you know that China & India had the largest
economies in the world between the 15th & 18th centuries? At
their current rate of expansion, they are on track to regain
that leadership in 50 years.

[unlawflcombatnt]

11. It's about American Investors "discovering" cheap foreign labor

It's about American investors discovering cheap foreign labor in China & India, and replacing the higher-priced American workers with the much cheaper workers in China & India.

Most of China's industrial profits leave the country and go into the pockets of their non-Chinese owners-- mainly Americans.

Without intense American investment, and consequent replacement of American workers with cheaper foreign workers, China & India would not be where they are today. And the American worker and middle class would not be in as bad a shape as they are today.

[dugggy]

12. True .and. False

It is quite true that American middle class is hurt
by cheaper labor abroad.

But it is also true that American consumer has benefitted
from cheaper imported goods AND services. The standard of
living of an average American is at highest level compared
to any previous period, even though inflation adjusted
income may not be at highest point.

I can now buy 3 pair of good shoes (dress, sneakers & golf)
for the same price as 1 good shoes made with American labor.
And this applies to thousands of items, which are affordable
only because of international trade.

It is also true that China earns a huge amount with exports
but it is not true of India. India exports a lot less than
China because the growing middle class in India is absorbing
a big proportion of its output. You rarely see items made
in India in US stores.

[Greyhound]

15. The American consumer has not benefitted at all. Those 3 pair of shoes are

of dramatically inferior quality and would be just as cheap if they were produced here.

The lie of labor being the major factor determining the price of goods has become so pervasive that even most of us blindly accept it, not even noticing all of the evidence to the contrary.

Goebbels was right.

[dugggy]

18. That has not been my experience!!

My golf shoes from Nike last a lot longer than the old
days. Not only that but the cleats are easier on my feet.
And they come with waterproof warranty now.

The sneakers of today have so many good features which did
not even exist 20 years ago. Again, my sneakers last a lot
longer than they used to.

Most of the shoes I buy are from Nike. Which means they
are engineered right here in Oregon, and manufactured in
China to Nike specs.

Same story with the electronic equipment including
computers. Far superior performance compared to 10 years
ago at fraction of the price.

The clothing of today is also better than American made
stuff from 20 to 30 years ago. Better quality, better fabric
and better looks.

Exact same experience with automobiles. I used to buy
strictly American brands (Chevy & Ford). The Japanese &
Korean cars I have now almost never break down. I will
never buy a Chevy/Ford/Chrysler. Cost me too much in repairs.

[unlawflcombatnt]

16. Cheap Labor

It's also true that the cost reduction of goods from using cheap foreign labor is not all passed on to American consumers. If it was, there'd be no increased profitability from using foreign labor. And if didn't increase profitability, outsourcing wouldn't occur.

When a $130/day American worker is replaced with a $4/day Chinese worker, that's a labor cost reduction of $126/day. For this cost reduction to actually help consumers, more than the equivalent of that $126/day cost reduction would have to be passed on to American consumers in lower prices. That's what would be necessary for the price reduction to compensate for the loss of wages by American workers.

Obviously that's not what's happening. Only a fraction of the labor cost reduction is passed on to consumers as price reductions. The remainder goes to increased profits for the Corporate multinational.

The end result of outsourcing is aggregate American wage loss that is much greater than price reductions.

The main "benefit" of outsourcing is to shift production income away from workers and into Corporate profits. The aggregate labor cost is lessened by outsourcing to cheap labor, reducing American workers income. At the same time, Corporate profits increase from the reduced labor cost.

[dugggy]

20. Regardless of wages, imported goods today are far superior & cheaper

My golf shoes from Nike last a lot longer than the old
days. Not only that but the cleats are easier on my feet.
And they come with waterproof warranty now.

The sneakers of today have so many good features which did
not even exist 20 years ago. Again, my sneakers last a lot
longer than they used to.

Most of the shoes I buy are from Nike. Which means they
are engineered right here in Oregon, and manufactured in
China to Nike specs.

Same story with the electronic equipment including
computers. Far superior performance compared to 10 years
ago at fraction of the price.

The clothing of today is also better than American made
stuff from 20 to 30 years ago. Better quality, better fabric
and better looks.

Exact same experience with automobiles. I used to buy
strictly American brands (Chevy & Ford). The Japanese &
Korean cars I have now almost never break down. I will
never buy a Chevy/Ford/Chrysler. Cost me too much in repairs.

Again, you are absolutely correct that Americans are having a
very hard time making good wages for low/semi-skilled jobs such
as factory labor, truck drivers, etc. which used to pay a lot more
in the good old days.

[AdHocSolver]

22. False and False. The American middle class are the consumers.

When I was a young man, I could buy a pair of quality leather shoes for $30.00 that would last for years. You merely replaced the heels when they wore down (for about $5.00) and they fit well and were comfortable. An occasional polishing and they looked like brand new. They were made in America.

Today, I have a terrible time finding shoes that look good and fit properly. I feel lucky if they last a year, and fix them? Don't make me laugh. You have to be too young to have experienced the availability of U.S. quality goods of forty and fifty years ago. Clothing was better as to fit and finish, tools were better than the imported crap. Not in all cases were American goods superior, but one still had the option of finding American-made goods.

As to computers and electronics, the quality and utility increased, and the prices decreased due to technological advances, not because of cheaper labor. Automation investment would have increased quality and reduced costs even if manufacturing of electronic equipment had remained in the U.S.

(The one case where you are correct about foreign quality being better is with respect to automobiles. That was true back then and it is true today. But that was only because American auto companies (not American workers) produced crap. My Japanese branded car was made in the U.S. by American workers and contains many American-made parts.)

You couldn't be very old if you think the standard of living is higher now than it was thirty, forty, or even fifty years ago. Food was safer, cheaper, and tastier back then. Housing was a lot cheaper. Reasonable mass transit still existed. Health care, with or without health insurance, was affordable. Corporations treated their workers better (strong unions, maybe?). Back in 1968, I was earning about $10,000 a year. I had full health benefits coverage, drove a full size Ford, could afford steak once a week, took two-week vacations, had a small furnished apartment. I didn't own a computer, but the internet didn't exist anyway. Oh, and I put money into a savings account that paid decent interest. All on $10,000 / year.

Better services? I have talked to service centers where the people were in India. I got better results talking to Americans.

A country produces wealth only through manufacturing. Everyone's standard of living increases when goods are manufactured and sold locally. Consumers are not benefitting from imported goods, certainly not when everything is imported. That impoverishes a country.

[dugggy]

24. I agree 100% that manufacturing is the key to creating national wealth, yet

so many here on DU are anti-corporations and it takes a
complex corporation to manufacture anything worthwhile.

My personal standard of living is much better now than 30
years ago, even though my income is proportionately about
the same accounting inflation. Like I said, I can buy 3
items now for the same money as 30 years ago. I have DVD's,
digital camera's, I-Pods, Cell phones, color printers,
digital sound systems, Titanium golf clubs with graphite
shafts, very high performance golf balls (pro-V1's & Callaway) just a few examples of goodies I could'nt even
dream of 30 years ago. And most of this stuff is foreign
made. So, three cheers for the cheap labor abroad!!!

[Perry Logan]

14. It's like 1984. They've been saying the economy is booming for seven straight years.

[unlawflcombatnt]

17. Durable Orders Stagnant

Also worth noting is that the current dollar value of Durable Goods purchases is the same as the 1st quarter. That means 0 growth in that sector in the second quarter.

[PsycheCC]

21. Good info.

Thanks again for the real numbers.

[Hawkowl]

25. Recession by definition

A recession by definition is two (2) sequential quarters where GDP declines. We probably are already in a recession if the numbers were calculated the same way as done during the Reagan administration. Unemployment also should be in the double digits as well.

However, with the imploding real estate/mortgage market, continued offshoring of jobs, and high oil prices, they will be hard pressed to hide the economic implosion.

[unlawflcombatnt]

27. Recession

"A recession by definition is two (2) sequential quarters where GDP declines. We probably are already in a recession if the numbers were calculated the same way as done during the Reagan administration..."

I'd say we would already be in recession if the BEA hadn't downwardly revised the
previous 2 quarters' GDP. The 2nd quarter's GDP was less than the originally listed GDP for the 4th quarter of 2006.

The unemployment rate is fudged by simply excluding more workers from the total "participating" labor force. If the government classifies someone is "not-in-labor-force", they aren't counted as unemployed. There are roughly 78 million working age Americans who are classified as "not-in-labor-force", and therefore are not counted as unemployed.

[kineneb]

26. "bring me a ... hedge (fund)?"

(with apologies to Monty Python, no shrubbery funds, unless they belong to Shrub)

http://www.globalresearch.ca/index.php?context=va&aid=5964
It's Official: The Crash of the U.S. Economy has begun

by Richard C. Cook

Global Research, June 14, 2007

It's official. Mark your calendars. The crash of the U.S. economy has begun. It was announced the morning of Wednesday, June 13, 2007, by economic writers Steven Pearlstein and Robert Samuelson in the pages of the Washington Post, one of the foremost house organs of the U.S. monetary elite.

Pearlstein's column was titled, "The Takeover Boom, About to Go Bust" and concerned the extraordinary amount of debt vs. operating profits of companies currently subject to leveraged buyouts.

In language remarkably alarmist for the usually ultra-bland pages of the Post, Pearlstein wrote, "It is impossible to predict when the magic moment will be reached and everyone finally realizes that the prices being paid for these companies, and the debt taken on to support the acquisitions, are unsustainable. When that happens, it won't be pretty. Across the board, stock prices and company valuations will fall. Banks will announce painful write-offs, some hedge funds will close their doors, and private-equity funds will report disappointing returns. Some companies will be forced into bankruptcy or restructuring."

-more-

and a newer post by the same author:

http://www.globalresearch.ca/index.php?context=va&aid=6239

The Crashing U.S. Economy Held Hostage
Our Economy is on an Artificial Life-support System


By Richard C. Cook

Global Research, July 7, 2007


Remember when the U.S. was the world's greatest industrial democracy? Barely thirty years ago the output of our producing economy and the skills of our workforce led the world.

What happened? It's hard to believe that in the space of a generation our character and capabilities just collapsed as, for example, did our steel and automobile industries and our family farming. What then are the causes of the decline?
Here's how I would put it today: our economy is on an artificial life-support system, a barely-breathing hostage in a lunatic asylum. That asylum is the U.S. and world financial systems which are on the verge of collapse.

The inmates are the world's central bankers, along with most of the financial magnates big and small. The fact is that the economy of much of the world is in a decisive downward slide which the financiers cannot stop because the systems they operate are the primary cause. As often happens, the inmates rule the asylum.

The problems aren't confined to the U.S. Unemployment worldwide is increasing, debt is rampant, infrastructures are crumbling, and commodity prices are rising.

-more-

and check out Mike Whitney's comments on the economy at:

www.informationclearinghouse.info

Trouble in Hedgistan:"Its gonna get a lot worse"(07/21/07)
The Impending Global Liquidity Crisis (06/04/07)


(glad to see your post... thought you might have disappeared)

[unlawflcombatnt]

28. Thanks for the post & Links

The article by Richard Cook is excellent. I'm going to post it elsewhere.

[unlawflcombatnt]

29. Auto Recession Worsens

The automobile industry recession worsened in July. All major automobile manufacturers reported declines in sales.

General Motors sales declined 22.3% in July.

Ford sales declined 19.1% in July.

Toyota's U.S. sales declined 7.4% in July.

Honda sales were declined 7% in July.

DaimlerChrysler's U.S. sales declined 9.1% in July

General Motors overall sales were down -9.4% for the year.

Ford sales were down -12.2% for the year.

Mercedes-Benz's U.S. sales were down 14% from the same month last year.


The U.S. economy is sinking. But the Corporate Media propagandists, along with the Bush plutocracy, have obscured this through distortion, deception, manipulation of statistics, and outright lying.

The stock market has either been fooled, or they just don't care.

unlawflcombatnt

Economic Populist Forum