From the standpoint of creating new jobs, 2% just doesn’t cut it. We need about 100,000 to 125,000 new jobs a month just to keep up with population growth and a 2% GDP will not give us half that, as we saw last quarter. Most economists say you need about 3.5% GDP growth to get solid job reports.Inventories are a big part of the story, and Mauldin explains why it's not a pretty story.
Seventy percent of the total growth in GDP came from growth in inventories, up by over 40% from the second quarter. Normally a build in inventories is a positive, as it shows confidence on the part of businesses. But business confidence surveys have not been all that good, which suggests that businesses may be cautious, as this cycle does not seem to resemble past cycles. How likely are we to see that same type of growth in inventories in the last quarter? Not very, I think.When inventories are increasing, Mauldin explains, that is a “plus” for GDP. When those inventories are sold, that reduces GDP. So if inventories are sold in the fourth quarter (think Christmas sales), that will be a drag on the GDP numbers.
In every previous post-recession cycle, GDP growth would typically be around 5% at this time. But this is not a business-cycle recession; it’s a deleveraging, credit-crisis recession.Two more components:
What economists call the “final sales” portion of GDP has just been growing at less than 1% over the last 18 months. That is a lukewarm number, to say the least. That is not the stuff of a strong GDP.
And export growth is slowing, which rather surprises me, as the dollar has been weaker. If imports rise and exports do not rise as much, as has been the case, that is a drag on GDP. State and local governments reduced GDP by 0.2%, and this12 % of the economy is likely to be under continued pressure, not adding to GDP for quite some time.
As the title on his article says, looking at the real numbers, the recession never ended.
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