By Kevin G. Hall, McClatchy Newspapers –
WASHINGTON — The second-quarter economic slowdown reported by the government Friday points to an economy stuck in low gear as a new look at the recession — it wasn’t as deep as thought and the recovery’s been weaker than first believed — gave new urgency to the presidential campaign.
“If we keep up at this rate, over the next year or two, we will simply never get back to full employment,” said Glenn Hubbard, a top economic adviser to Republican presidential candidate Mitt Romney.
Alan Krueger, a top economic adviser to President Barack Obama, countered that the report proved the value of Obama’s stimulus package of spending and tax cuts. He said the report found state government spending aided by the stimulus increased in 2009, helping cushion the blow of the recession, and that the end of the stimulus since then has cut state and local government spending and weakened the recovery.
Either way, the reports added up to a weak economy.
The U.S. economy grew at a sluggish annualized rate of 1.5 percent during the second quarter, the Commerce Department said, a deceleration from the 1.9 percent growth rate recorded during the first three months of 2012.
Adding to the feeling of economic blah, consumer confidence as measured by the Thomson Reuters/University of Michigan consumer sentiment index slipped in July. The survey, released Friday afternoon, showed that high food prices and weak hiring combined to sink confidence.
“The greatest concern to consumers is that wage and job growth will remain depressed in the foreseeable future, and that meager gains are likely to be diminished in the years ahead by rising taxes and benefit cutbacks,” Richard Curtin, director of the survey, said in an accompanying statement,
The weak growth in the gross domestic product, the broadest measure of goods and services produced in the U.S. economy, may improve over the remainder of the year but not by much, warned economists.
For one thing, a slowdown in China and recession in much of Europe is hurting U.S. exports, as well as sales abroad of foreign-made goods by U.S. multinationals such as Ford and General Motors.
“Our exports have been hit pretty hard. In this slow-growth environment, these kinds of shocks, concerns, are making businesses very cautious in terms of spending, and hiring in particular,” said Nariman Behravesh, chief economist for forecaster IHS Global Insight. “That explains why the jobs numbers are so weak.”
Add those woes to the fight brewing in Washington over expiring tax cuts and planned spending cuts and there’s likely to be continued subpar growth in the months ahead, even if growth steps up a bit.
“What it tells us is the economy remains stuck in low gear through the first half of 2012, but there are reasons to expect a modest acceleration in the second half of the year. Among the bright spots are housing, and we would expect that if the European situation clarifies, we could see … a return to risk taking that would help lead to firmer growth,” said Chris Varvares, senior managing director for Macroeconomic Advisers, whose forecast for quarterly growth was right on target Friday.
