For five years and counting, Obama apologists have assured us that the economy is “poised” for recovery. It’s going to happen any day now – just you wait and see. The period from 2009 to the present represents the weakest post-recession period ever. We’ve grown accustomed to the nauseating spectacle of the Administration celebrating slight dips in the headline unemployment rate cause almost entirely by people giving up and dropping out of the workforce entirely. But soon the big recovery will begin! Every modestly optimistic monthly statistic, even those which are clearly anomalous, is heralded as a sign of Recovery’s impending arrival, while every setback is reported by a puzzled media as “unexpected.”
Time for those media brows to furrow deeply again, as the Associated Press reports an important metric of future growth falling right off a cliff, on the eve of the State of the Union address:
Businesses cut back sharply on their orders for long-lasting manufactured goods in December with a key category that signals business investment plans falling by the biggest amount in five months.
Orders for durable goods fell 4.3 percent in December compared with November, when orders had risen 2.6 percent, the Commerce Department reported Tuesday. The weakness was led by a big 17.5 percent drop in the volatile category of commercial aircraft.
There was widespread weakness in a number of categories including a 1.3 percent decline in demand for non-defense capital goods excluding aircraft. This category is viewed as a proxy for business investment plans.
Some of the December weakness probably reflected a temporary dip following November’s big jump which had been driven by businesses rushing to take advantage of expiring tax breaks.
The December decline came as a surprise to economists. The consensus view among economists was that orders would post a moderate rise reflecting what they believe is an improving outlook for U.S. manufacturers
In the great airport lounge where America waits for Recovery to come trundling down the concourse with her suitcase full of jobs and prosperity, every flight status just flipped to “Delayed” again. Oh, well, might as well mosey over to the Starbucks and grab a frappucino while we wait for her. They take EBT cards, right?
This doesn’t seem terribly surprising, or at least not very complicated. Expiring tax breaks inspired businesses to build up inventory and place some bets on a turnaround – an anomaly partially created by government policy, which the media generally interpreted as an in-flight call from Recovery saying that her plane was ahead of schedule and she might even get here in time for lunch, so we should check the airport amenities to see if they’ve got a Chili’s with an open table.
Now those business managers are feeling “cautious” instead of optimistic, as an economist quoted by the AP describes them. Interestingly, consumer demand for major items like cars and houses is still decent, but the corporate world is not behaving as though it expects that demand to hold up, or extend to other markets. Maybe they’re getting ready for the great second wave of ObamaCare chaos, which is going to eat away a lot of disposable income from middle-class families who suddenly learn their old insurance has been canceled, and expensive ObamaCare policies with high deductibles are the only alternative. And new housing sales were actually quite disappointing at the end of 2013, although this was widely attributed to bad weather. Recovery’s plane runs into a lot of weather delays.
The AP says economists are still “hoping” for a turnaround in 2014, although that’s not quite the same thing as predicting one.
Economists are hoping that 2014 will mark a turning point for an economy that has performed at sub-par rates for much of the time since the recession ended in June 2009. Many analysts are forecasting the economy will grow by around 3 percent in 2014, up by a full percentage point from 2013.
Much of the hope for a better 2014 reflects a belief that the federal government will be less of a drag this year. In 2013, higher taxes and across-the-board spending cuts trimmed about 1.5 percentage points from growth.
That may seem like an odd sentence, but yes, both tax increases and spending cuts depress the official measurement of GDP growth. That’s because government spending is counted as part of our Gross Domestic Product. Uncle Sam is the nation’s largest buyer, employer, “investor,” and landlord, you know. You can’t just leave him out of the GDP, even though he spends a lot of pink and blue deficit dollars emblazoned with a drawing of a little fellow with a bushy mustache and top hat. Won’t the kids be surprised when they get slapped with the tax bill for a big chunk of our anemic-but-not-officially-a-recession GDP? I’m sure we’ll all have a good laugh about it.
The danger zone would be for things to pick enough for the Federal Reserve to discontinue its bond-buying stimulus spending spree – which has been pumping a lot of money into Wall Street, in a process that would be denounced as “trickle-down economics” if it wasn’t authorized by a Democrat – but not enough to survive the resulting sugar crash. The notion of anyone talking about “recovery” when a stimulus program of large-scale federal bond-buying is still in effect seems dishonest to me, but that’s the world we live in.
Besides, if the government and media are honest about how weak the economy is, people will freak out, and the economy will get weaker. So remain poised and keep waiting for Recovery. She’ll be here any day now.