RSS Feed MenuMy column in today’s National Post carries an unfortunately overstated headline, “America’s Private-Sector Era is Over.” Not exactly!
Here’s the key point:
The U. S. private economy continued its horrifying downward trajectory in the second quarter of the year. Private investment in everything except housing dropped 9.6%. Private investment in non-residential real estate slumped 17.3%. Investment in housing — ground zero of the U. S. economic disaster — collapsed by 23.3%.
Personal consumption, which had continued to grow very feebly even in the awful first quarter, contracted in the second.
Altogether, we owe the improved news in the second quarter to two sectors: government spending and cars. And the car number is just government spending by a different name. The federal government gave away $3 billion in subsidies to encourage consumers to trade old fuel-inefficient cars for newer models. The 700,000 new cars sold under the program added 0.19% to second quarter GNP growth. Nice!
But the program ended in August, and so did the sales. New car sales tumbled 22.7% in September.
The American private economy remains deeply distressed. The private economy got worse in the second quarter, not better. If car sales are any indication, this third quarter promises no better.
Read the full column here.
midcon // Oct 3, 2009 at 12:33 pm
There is no understating the lack of consumer/citizen confidence in everything, including the economy, jobs, foreign policy, political leadership, and financial institutions. It will take a lot to restore the public’s faith in the institutions that have influence their lives over the past 50 years.
Despite the fact that some folks are now working, they are not about to become economic engines of consumption. They will continue to husband their resources and pay down debt. The excesses of past decades was a sign of confidence in America. The continue downward trend is a sign of the lack of confidence. The government, corporations, and financial institutions have a long way to go to restore that confidence.
SFTor1 // Oct 3, 2009 at 1:57 pm
It sure takes a while to get out of a mess, doesn’t it?
I believe the actions taken by our government and ordinary citizens, mostly in the form of increased frugality, will go a long way towards restoring faith in America’s ability to manage its own affairs. It’s what most other countries have done for a long time.
sinz54 // Oct 3, 2009 at 7:59 pm
I would like to remind everyone that the U.S. economy doesn’t turn on a dime; and no economic recovery program should be judged by its first 6 months of performance.
Under the Reagan recovery program of 1981, of which we conservatives have been proud, the economy continued to worsen, with unemployment hitting a high of around 10% by 1982. Then, suddenly, once investors began to realize that inflation was really ebbing, they poured back into the stock market and the Dow zoomed upward. The economy was on its way back.
Under the FDR recovery program of 1933, of which liberals have been proud, the economy mended but slowly. The unemployment rate never fell below 10% in FDR’s first two terms. And by 1938, the unemployment rate had actually risen back to 20%.
So it’s premature to judge the Obama program. However, the mistake Obama made was raising expectations of a swift recovery, claiming that unemployment would peak and start declining almost from the very month the stimulus package was passed. Like Reagan, Obama should have told the American people that economic recovery is going to be a long-term investment, not “change.”