The Bureau of Economic Analysis recently confirmed what most of us in the trenches have known for some time – the economic recovery was barely that. GDP growth for the first quarter of 2011 was revised down sharply from 1.9% to a paltry 0.4%. Its initial estimate for GDP growth in the second quarter was a whopping 1.3%, the lowest quarterly growth rate since the recovery began in 2009.
The Federal Reserve Bank’s Open Market Committee also weighed in at its meeting earlier this month noting that “Information received since the Federal Open Market Committee (FOMC) met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up.” It reaffirmed that it would keep the target range for the federal funds rate at 0% to .025%
More important though was the significant change in language in the statement concerning the duration. The FOMC stated that it “currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.” This was a marked departure from the language in June’s statement which read “are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”
This turn of events should come as no surprise. One does not need to have an advanced economics, finance, accounting or other degree to ascertain that all is not well with the economy and hasn’t been for some time. One only needs to be observant of what is going on around them to see the many signs of illness. The following are two examples of many that I use to gauge what’s happening with the economy.
When traveling toSan Francisco, which I normally do two or three times a month, I take the ferry in fromVallejoas it is much more convenient than driving. From 2000 through 2007 the 5:30 AM ferry would depart as early as 5:15 AM or so as it had boarded its capacity of 300 passengers. Today it departs promptly at 5:30 AM with perhaps 100 passengers. Departures throughout the day have now been reduced some 20% to 25% and in several cases buses have replaced ferries.
From 2005 through 2010 I would fly out ofOaklandairport once or twice a month. It is 53 miles to the parking lot inOakland. From 2005 through mid-2008 it would take on average about 80 to 90 minutes to get to the airport by 5:45 AM and 10 to 15 minutes to get through security. In 2009 and 2010 the trip would take 55 to 60 minutes and one could walk right up to the TSA’s initial checkpoint.
But you get the point. There are many sign posts along the way; you just need to be looking for them. Unfortunately, the political “elite” inWashingtonare so detached from reality there is little likelihood to be any credible solutions to the serious economic problems confronting our nation. Holding the debt ceiling hostage was proof positive that our elected leaders are anything but leaders. The uncertainty created by this debacle created a lack of confidence and was reflected in the stock market with the S&P 500 tumbling almost 17% in the last 30 days. Suck it up; there is a long hard slog ahead.