Archive for October 26, 2012

Captain Rick: The U.S. economy grew a bit faster in the third quarter than the sluggish 1.3% of the second quarter, according to the first of three estimates for the third quarter. First estimates are notoriously optimistic, especially when they come before a presidential election. The first estimate for the second quarter was 1.5%, raised to 1.7% on the second estimate and then sank to the ‘final’ 1.3% figure. We will have to wait until December for the more realistic third estimate.

Gross domestic product (GDP) is the broadest measure of the nation’s economic health. 3% economic growth, represented by the red line in the chart below, is necessary to provide enough new jobs to keep pace with U.S. population growth. America has fallen short in all but two quarters of the past four years. This means that the percentage of eligible workers who are working continues to drop almost every month. Real unemployment is continuing to increase, in spite of the bogus and meaningless unemployment percentages the U.S. government publishes each month that show a slow decline. America’s unemployment rate is currently published to be 7.8%, but the real number is actually about twice that…and rising, not falling.

I do not see anything on the horizon that is going to raise America continuously up above that red line, where we need to be to enjoy a healthy and growing economy … at least for the next several years, perhaps 2017 or beyond. Even the Fed, the IMF and other global financial authorities forecast similar sluggish growth through 2015. Europe appears to in recession or close to it. U.S. growth of 1.3% in the second quarter is knocking on recessions door. China’s economy is slowing quickly as a result of economic sluggishness in the West. This paints an anemic image of America’s economic health, with a global ripple effect. If the U.S. legislature attacks the “Fiscal Cliff” with vengeance when they return to work in January, we might see a boost in GDP in coming quarters. I am referring to major spending cuts and yes…tax increases. Anything short of that means “kicking the can down the road”, as has been done for many years, and will give us continued economic stagnation and possible recession.

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