Last summer, the U.S. economy seemed like it was just starting to hum along. The government reported growth of 4.1 percent in the third quarter, the fastest it had been since 2011. Then, the fourth quarter came along, bringing with it a government shutdown and the start of snow, and the economy’s growth slowed by nearly 2 percentage points — dropping to 2.4 percent, according to the latest estimate from the Bureau of Economic Analysis.
Time to worry? Not yet. BEA’s lower growth estimate came as no surprise to economists. When you consider what the economy went through in the final three months of the year, some economists argue its performance wasn’t so shabby.
“While 2.4% is fairly sluggish, it was despite more adverse than usual weather at the end of the quarter and the government shutdown at the start,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients after the report’s release.
BEA’s revision reflects cuts in consumer spending, lower inventory investment, fewer exports, and less state and local government spending than initially thought.
The 16-day partial government shutdown is still believed to have subtracted 0.3 percentage points from growth, a spokeswoman for the Bureau of Economic Analysis confirmed Friday. The bureau doesn’t specifically break out weather effects on the economy unless there are catastrophic events, she said, but economists widely see the tough winter weather in December, January, and February as having contributed to the spate of soft data that have been released recently.
“Part of [the recent] softness may reflect adverse weather conditions, but at this point it’s difficult to discern exactly how much,” Federal Reserve Chair Janet Yellen told members of the Senate Banking Committee on Thursday. “In the weeks and months ahead, my colleagues and I will be attendant to signals to indicate whether the recovery is progressing in line with our earlier expectations.”
Add back the 0.3 percentage points from the government shutdown and a little bit more from the weather’s drag, and the recovery seems to be progressing as expected, said Robert Dye, chief economist of Comerica Bank. “This is not a 4 or 5 percent [growth] economy, it’s a maybe something in the order of 2.5 to 3 percent economy, so that’s not a bad number,” Dye said of Friday’s revision.
Economists don’t expect much of a pickup in the first quarter, thanks to that bad weather and those weak data readings, but many remain hopeful that growth in 2014 is likely to beat out the 1.9 percent growth of last year.
The Bureau of Economic Analysis will release an additional update on fourth-quarter growth on March 27.
What We're Following See More »
Foreign Policy takes a look at the future of mining the estimated "100,000 near-Earth objects—including asteroids and comets—in the neighborhood of our planet. Some of these NEOs, as they’re called, are small. Others are substantial and potentially packed full of water and various important minerals, such as nickel, cobalt, and iron. One day, advocates believe, those objects will be tapped by variations on the equipment used in the coal mines of Kentucky or in the diamond mines of Africa. And for immense gain: According to industry experts, the contents of a single asteroid could be worth trillions of dollars." But the technology to get us there is only the first step. Experts say "a multinational body might emerge" to manage rights to NEOs, as well as a body of law, including an international court.
Not to be outdone by Jeffrey Goldberg's recent piece in The Atlantic about President Obama's foreign policy, the New York Times Magazine checks in with a longread on the president's economic legacy. In it, Obama is cognizant that the economic reality--73 straight months of growth--isn't matched by public perceptions. Some of that, he says, is due to a constant drumbeat from the right that "that denies any progress." But he also accepts some blame himself. “I mean, the truth of the matter is that if we had been able to more effectively communicate all the steps we had taken to the swing voter,” he said, “then we might have maintained a majority in the House or the Senate.”
Ronald Reagan's children and political allies took to the media and Twitter this week to chide funnyman Will Ferrell for his plans to play a dementia-addled Reagan in his second term in a new comedy entitled Reagan. In an open letter, Reagan's daughter Patti Davis tells Ferrell, who's also a producer on the movie, “Perhaps for your comedy you would like to visit some dementia facilities. I have—I didn’t find anything comedic there, and my hope would be that if you’re a decent human being, you wouldn’t either.” Michael Reagan, the president's son, tweeted, "What an Outrag....Alzheimers is not joke...It kills..You should be ashamed all of you." And former Rep. Joe Walsh called it an example of "Hollywood taking a shot at conservatives again."
In a sign that she’s ready to put a longer-than-expected primary battle behind her, former Secretary of State Hillary Clinton (D) is no longer going on the air in upcoming primary states. “Team Clinton hasn’t spent a single cent in … California, Indiana, Kentucky, Oregon and West Virginia, while” Sen. Bernie Sanders’ (I-VT) “campaign has spent a little more than $1 million in those same states.” Meanwhile, Sen. Jeff Merkley (D-OR), Sanders’ "lone backer in the Senate, said the candidate should end his presidential campaign if he’s losing to Hillary Clinton after the primary season concludes in June, breaking sharply with the candidate who is vowing to take his insurgent bid to the party convention in Philadelphia.”