The final estimate for second quarter (April-June) 2011 economic growth was revised back up to 1.3%, from the BEA's previous 1% estimate. Although it's better than first quarter's .4% growth, it's still not the 3% or so needed to create enough new jobs to make a dent in the nation's unemployment rate.
What's holding back the economic recovery? Well, some of the sluggishness in the second quarter was due to a slowdown in auto parts from Japan, thanks to it's combination earthquake/tsunami/nuclear meltdown In fact, durable goods orders were 4% better in July and August than they were last year.
Another drag on growth was cutbacks in state and local government spending. Total government spending was only up 2%, driven mostly by defense spending. Expect GDP to suffer whenever budget cuts are implemented. (GDP is short for the nation's gross domestic output, which is how economic growth is measured.)
However, the greatest drag on the economy is the the 1.7 million foreclosures in the shadow inventory hanging over the housing market. Normally, housing contributes 10% to economic output economy. Ever since the recession, it's only made up 2%. That's millions of construction workers who can't find work because new homes aren't being built.
It will take at least a year, at current rates of sale, for these foreclosed homes to clear the market.
For a history of all GDP reports since 2007, see GDP Current Statistics.
What It Means to You
Pay attention, as we head into the 2012 Presidential election season, as to which candidates address the housing market, specifically the foreclosure crisis. I haven't heard much from the Republican candidates -- please let me know if you do. Obama has only partly addressed it, with the HARP program and the jobs bill, which would provide some construction jobs.
Economic growth is being sustained through exports to emerging markets, like India, China and Brazil. However, that's obviously not enough to reach the the 3% GDP growth levels.
The campaign slogan in the '90s was "It's the economy, stupid." This year, it should be more narrowly focused "It's housing, housing, housing."
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Comments
Though the US growth was revised upward unemployment rate of 9.1% is still the biggest concern for the world’s largest economy.