The 1.6% GDP estimate sounds alarm that unemployment rates will be rising

Posted: September 3, 2010 in Economy, GDP, Recession, Unemployment
Tags: , , , , , , , ,
The recent GDP estimate of 1.6% growth is anemic. It sounds an alarm that the unemployment rate will be on the rise. I predict a “Double Dip Recession” and this will be a “Lost Decade”. 
  
The broadest gage of our economy is the GDP (Gross Domestic Product) Growth Rate.
It is calculated every quarter by Uncle Sam. It captures the total value of all US goods and services.
  
GDP ZONES:
  
REAL GROWTH: A GDP growth rate above 3% reduces unemployment (light shaded upper band on chart in the link below).
A GDP growth rate of 5% for 4 quarters is needed to reduce the US Unemployment Rate by 1%.
  
ANEMIC GROWTH: A GDP growth rate of 0%-3% increases unemployment (darker shaded middle band on chart in link below).
In this area, our economy can not provide enough new jobs to keep up with new graduates entering the workforce. 
  
RECESSION: A GDP growth rate below 0% for 2 or more quarters (lighter shaded lower band on the chart in link below).
  
DEPRESSION: A GDP growth rate below -10% for 4 or more quarters.
  
Captain Rick’s Past Economic Projection Score Card of correct calls:
2006 US Real Estate Market Crash
2008 US Bank Meltdown
2008 US Stock Market Crash
2008 US Recession
2010 European Financial Crisis
Pending…..US & Europe: Double Dip Recession 2011-2013
Pending…..US & Europe: Lost Decade 2006-2016
Pending…..China: Real Estate collapse 2011-2013
Pending…..Canada: Real Estate collapse 2011-2015
 
Captain Rick’s Economic Projection:
The recent significant reduction in the estimate for the US GDP rate (1.6%) for the second quarter of 2010 is alarming.
It adds fuel to the projection of a “Double Dip Recession” by many economists.
What I find to be of much greater concern is the dominance of all but 3 of the past 18 quarters lying in the “Anemic Growth” or “Recession” range. That signals a very strong possibility that we are in a period that some economists refer to as a “Lost Decade”, one that has little or no real growth.
Scanning the economic horizons, I see no economic engines in the US that will move the GDP growth predominantly above that 3% line any time soon.
I predict that we will see a “Double Dip Recession” and this will be a “Lost Decade”.  
 
Captain Rick’
. . . My economic perspective presented thru the eye of an engineer and a lifelong student of economics.
 
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Comments
  1. Stark Leder says:

    Its about time someone posted some common sense about whats going on with our economy that all of us can understand. I have added your page to my RSS feeds. Keep the great stuff coming. Thank you Captain Rick!

    • atridim says:

      Thanks Stark. Its good to hear from you. My congrats for you being my first reply. I hope to present lots of great material from a whole new perspective. I hope you will enjoy it and comment often!
      Captain Rick

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