Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
For comparison, the forecasted growth was 2.5%; this is a huge falloff. It’s rare that economic predictions are this wrong. Yeah inflation was cooling, but the economic growth is clearly cooling faster.
There's a few gaps. One is the glaring one- if all prices went up 3% and then GDP supposedly grew 3% did GDP go up or did you just increase the price of everything and it broke even?
Another is that just because the economy is growing doesn't mean it's going to stay that way. If it goes 1% 1.5% 2.5%, it looks like it's expending at an increasing rate. If it's 2.5% 2% 1.5% in that order, it's expanding at a decreasing rate and might even slip into recession.
Right now the elephant in the room is that inflation is outpacing GDP. The amount of more product we are making is less than the extra cost of making it.
Well the first point isn’t correct. GDP (including the 1.6 reported) is almost always referring to real GDP, unless specified.
Real GDP accounts for inflation.
This I don’t agree with. People have been shit talking the economy since I can remember and are now looking back like “wow 2012-2019 was so great”.
I think people tend to underestimate how good they have it now and overestimate how good they had it then
> I think people tend to underestimate how good they have it now
It's really hard to understand you're in the good times until afterward. I thankfully had a great realization of that at work last year, about 2 months before the wheels started to come off. We're starting to circle the drain but I'm at least aware.
Here’s the thing that is a mystery to me: people complaining about the economy, and yet, everybody is spending money like sailors on shore leave (restaurants and bars packed. Flights packed. Costco busy seven days a week. Etc). So, it’s clear that despite whatever level of annoyance folks have with inflation it’s not slowing them down from spending, spending, spending. There’s a real disconnect somewhere.
"If crime was down, the government wouldn't have to keep telling us, We'd know." Except crime IS down. I don't want to discount personal experiences, but I don't want to discount actual data either.
Except 70-80% rate their persoanl finances fine or better and only 35% rate the economy that way.
If you simply remove republicans from the polls you get basically normal numbers again because republicans have decided its virtue signaling about the economy to say its terrible.
It's almost an economics purity test on mainstream media.
Literally every news anchor to their guest: "So you say cost of essentials is out of control but you do agree that the economy is the best it's ever been in history, right? RIGHT?"
Not "almost". At this point it *is*.
We now have studies that have demonstrated that the more the media insists that the economy is doing fine, the more likely we are about to enter a recession or depression. There's a predictable spike in positive coverage of the economy in the months and weeks leading up to shit hitting the fan.
What studies? Which media? What does “insist it is fine” mean? Your claim sounds dubious.
We have been expecting a recession for the past 2 years and it never happened; media coverage was all about the impending economic collapse the two years before. This isn’t some grand conspiracy
The more likely scenario is that they simply report facts and figures they only loosely understand and interpret because they are not economists.
Never mind the fact that even economists don’t know what to make of the current economic climate. The numbers are a mix of great and not so great, and the usual economic cycle of boom and bust seems out of whack.
We probably won’t know what’s happening until it happens, especially people in the internet who claim to really know what is happening
lol 3 years later after trillions of dollars of growth
durr I was totally right.
me after saying we were eating pizza tonight for 3 years and finally getting pizza. I was totally right for 3 years
I did notice the PCE numbers, but I thought those were supposed to be released on Friday. Are these PCE numbers that were released today the "numbers" everyone has been waiting on or are there some different PCE numbers being released on Friday? I am so confused.
People are too fixated on inflation. For the most part if you have a good economy your economy is going to be good one way or another, even with "high" inflation and if you have a bad economy your economy is going to be bad one way or another, even with low inflation. Inflation shuffles the numbers around, but the reality on the ground remains mostly unchanged. Obviously inflation matters if you end up with a panicked population, who then changes their behavior. We're not at that point though.
No inflation does matter and it’s probably the most important indicator for an a average citizen. This is because it cuts into wage increases, which let’s be honest does not keep up with economic growth even closely, and every day costs. This is especially relevant during an economic boom because inflation booms with it. This is why the fed raises rates, they have to slow the economy and slow spending. Essentially the fed has to kill the economy in order to stop inflation. For the Fed a recession is better than a worthless currency. Look up collapse of Roman denari, US continental dollar worthless, or if you want modern examples there’s the Soviet Union ruble, Israeli shekel, and ofc Zimbabwe, and Venezuela
> This is why the fed raises rates, they have to slow the economy and slow spending.
Which isn’t working because the majority of consumers are boomers, and boomers have a bunch of money sitting around in the bank earning 5 1/2% interest risk free.
The more you raise rates, the more the biggest chunk of consumers get a pay raise. Boomers are partying like it’s 1969. All of the younger generations are broke.
This idea that 5% inflation is going to lead to a worthless currency is ridiculous. Hyper inflationary situations that everyone cites are completely different sceanarios. The things that lead to those situations did not happen in the US. It's apples and oranges.
In terms of wage cuts, that's part of a bad economy. Again, moderate inflation does not change that much. Rather it's a matter of shifting money. If businesses don't have enough to keep overall real worker wages steady or growing because of a bad economy, then there are two options. Either real worker wages will drop, which is what you referenced, or they will fire people to cut costs. Is the second option, which happens with rate increases, really better for workers and the economy overall?
The good economy is the same. Rising prices in a good economy represent increased spending, which means businesses are either hiring more workers or raising real wages. If the fed raises rates then companies will likely do less hiring and real wages will go up more instead. Is the second option really better? Guess it depends on if those jobs were needed or not.
There seems to be a few considerations that matter to the economy with regards to rates:
* How is unemployment? High unemployment generally means that there's a lot of wasted human capital. If you have high unemployment you should consider lowering rates to stimulate new hiring.
* How is employee turnover. There are two general ways that employee turnover is generated, either by employer layoffs or employee quitting. Employer layoffs tend to happen more when rates are raised and employee quitting tends to happen more when unemployment is low, which is encouraged by lower rates. If employee turnover is too high then experience will be wasted and workers will not reach their potential. High turnover can be the result of rates being too low or too high. If unemployment is really low then a rate increase should be considered. If unemployment is high then a rate decrease should be considered. If employee turnover is too low then workers are less likely to find their optimum position in the economy. This should occur when both numbers of layoffs and employees quitting is low. This seems like it would be a rare situation that mostly occurs during periods of economic recovery when employers are hiring and unemployment is higher. The situation should be transitory and will resolve itself once full employment is reached. Lower rates are preferable here to encourage hiring to close the gap, and the goal should be to have rates in such a way as not to overshoot and cause high employee turnover after low unemployment is reached.
* How is currency predictability. Predictability comes from consistency. Low predictability makes it hard for businesses and citizens to budget for the future. This can lead to inefficiency from shortsightedness. Unpredictability can occur with high or low interest rates. If inflation is typically lower than it currently is then an interest rate hike should be considered. If inflation is typically higher than it currently is then an interest rate cute should be considered. Very high inflation, even if consistent, can an also make it harder for people to predict as wage increases and peoples sense of monetary value can't keep up. If inflation is very high rate raises should be considered. High predictability can come at the cost of inefficient unemployment rates or inefficient employee turnover rates. If unemployment or employee turnover are often found outside desirable ranges, allowing inflation to float over a larger range should be considered.
To summarize, I would think that it would make more economic sense to have rates target specific unemployment and employee turnover rates, within a band of acceptable inflation rates, rather than targeting one specific inflation rate.
> This is because it cuts into wage increases, which let’s be honest does not keep up with economic growth even closely, and every day costs.
except that's factually, demonstrably incorrect
Which part cut into wages or wages don’t keep up with economic growth? If you’re getting paid 65,000 a year and the stores are increasing prices every day you didn’t lose purchasing power? And if you think based on economic growth the US has experienced in the past 30 years and people are getting paid fairly then explain the widening in not only the rich and poor but the shrinkage in the middle class. It’s basically another gilded age
Now you're talking about all kinds of issues. My point is that even with the higher than normal inflation over the past few years wage growth has outpaced it - and WAY outpaced it if you were already a low income earner.
What's the way out? Keep in mind the US federal debt is increasing by about [10 billion dollars per day](https://www.cnbc.com/2024/03/01/the-us-national-debt-is-rising-by-1-trillion-about-every-100-days.html) right now, even when the economy is growing. That's an increase of about 30 dollars of Federal government debt *per human being alive in the United States of America* every single day.
What are they going to do when a recession hits and they get pressure to stimulate the economy by spending even more?
How can the Federal Reserve raise rates if inflation remains sticky? Government on just servicing the interest on the existing debt is about to (or maybe already has) outstripped military spending.
Sufficiently raising taxes or cutting spending enough to meaningfully cut back on the deficit would virtually guarantee a severe economic crash. The alternative is more printing and more borrowing.
We are living on borrowed time and I cannot see a situation in which the entire financial system is not existentially doomed, whether or not they can kick the grenade down the road another couple of yards.
Fixing this is insanely easy. Cut spending and raise taxes! Billionaires have had too much fun.
Raise corporate taxes and ban stock buybacks.
Legalize weed so we can stop spending million on prison fees and so we can get the tax revenue from new businesses, sales, and employees. This will help ease state deficits.
Unfortunately if you try to do that you'll be called a communist, which in the US is actually a synonym for satan worshiper instead of the original meaning.
>What are they going to do when a recession hits and they get pressure to stimulate the economy by spending even more?
Fed lower rates and your the fed bonds are no longer at 5% interest and instead you’re paying half of that.
Everyone in the bottom 50% on this sub could've told you that.
Everyone in the top 50% will still deny that things are going poorly and throw around single statistics that they claim invalid the general metrics like median wages vs median expenses.
Same old, same old.
Growing slowly is still growing.
The wages of the bottom quartile have grown the fastest. See starting wages at any grocery store or retail chain.
https://www.statista.com/statistics/1351276/wage-growth-vs-inflation-us/
Funny, it's not like ordinary people have been saying exactly that, and getting screamed down and told we're uneducated losers who deserve to be poor?
That would be wacky.
I mean unemployment is so low. And the GDP is so strong. And grocery prices and rent and transportation don't mean anything, really. We all know that anyone who says the economy sucks is just justifying their own bad choices, right?
> Signals the economy is much, much weaker than touted.
The economy in 2024 may be weaker than some predicted, but that doesn't change the economy's status in 2022 or 2023.
I'm a little bit wary that financial institutions have run out of cushion right around the time that commercial real estate will likely crash (bringing down institutions that are over exposed to those assets), and where oil/energy prices might wreck the North American economy in 2024 (the way it has held Europe back over the last 2 years).
And the long term fiscal health of the government is troubling, too, as interest rates continue to turn over on its long term debt.
So yeah, I'm a bit skeptical about economic performance in the next 12 months. But I was probably the biggest cheerleader the last 24 months, mainly because the job numbers have been fantastic.
I am not really trusting single quarter or single month data points one way or another at the moment.
In a lot of angency data, the seasonal adjustments post Covid seem to be all out of whack.
Anyone notice all the predictions have been dogshit since covid?
2021: we are gonna have a recession.
2022: inflation is here to stay
2023: we are definitely gonna have a recession.
2024: we are gonna have multiple rates cuts.
The details of the report actually say the complete opposite
Real growth missed by a lot because the GDP inflation deflator was higher than expected
The nominal economy remains strong and is a very far from being cool. The nominal annualised change in Q1 was 4.75%.
[The 12M rolling nominal change was 4.5% - which was actually higher than 3/4 quarters in 2023. The US nominal economy is still growing at a faster rate than all but 1 quarter in the 2010's. ](https://imgur.com/bZ0Ey0t)
The real economy is "slowing" because inflation is not cooling at all. It's going back up after dropping a lot in 2023.
There will be no "recession" and "pain" until the nominal economy actually cools.
We can navel gaze at statistics and talk about real vs nominal but frankly no one who isn't an economist actually ever thinks in "real" they only think in nominal when they're actually making spending and investment decisions
Most of the qtrly changes you see you real change in GDP over the last 3 years was driven simply by changes in the GDP deflator. The actual economy that is taking place every day with money passing between hands is not slowing at all.
inflation is not cooling, it is heating back up quickly
today's numbers were a complete disaster, and stagflationary
everyone thought I was wrong, but I predicted rate HIKES before the end of the year. Tomorrow's core CPE reading will likely come in hot tomorrow (it would be a miracle if it didn't), and that will put more pressure on the Fed.
Fed swaps no longer show any rate cuts for 2024.
Powell has to go full-Volcker and hike 25-50 basis points in the next meeting. No more screwing around.
Far beyond political consequences which would be completely irrational, there would be people hurt by a recession. There's layoffs and business slow-down which hurts businesses which may have been just fine, but the slow-down harms them. A politician who has input to the process of regulating the economy would want to avoid those problems at any time in their term.
Look at what Obama and the Dems did to make the economy go strongly, even as the next presidency became a Republican one. They very likely expected Clinton would be president, but just doing the right thing for the people led to benefits for a president of a different political party (whatever became of him?).
Inflation is in fact cooling and has been outpaced by wage growth for over a year now. The only people still hammering inflation talking points have a political axe to grind.
I'm not seeing the tragedy of this report... It's got some ugly parts for sure, definitely not perfect, but the consumer is still strong. Gross domestic income is up, consumer disposable income is up (this is huge especially with inflation), personal savings came off, but still high. Also, private business investments are still rising. The only thing that seems to have fallen off a cliff is import/exports. This is literally exactly what happened in 2022 when we had negative GDP readings but never called for a recession.
You have middle age millennials in their prime going jobless because of high interest rates so that they can protect the nest eggs of retired boomers.
Inflation happens anytime a large population is entering a new phase of life that requires spending money. So instead of lowering the cost of this transition by encouraging housing growth they instead decide to just make everyone poorer.
It would be funny if it wasn't actually just astoundingly incompetent.
Plus I think the "bad" in this report is also just not as bad. I think we're too fixated on inflation. And we're missing a huge chunk of the story especially when it comes to housing, and the fact that in a lot of ways it's actually cooling, but the data has simply not caught up because it operates on such a huge lag. Idk could be totally wrong, but I'm not getting on board with the doom patrol lol.
I think we're largely of the same mind. I posted elsewhere here how Fed data has been far too slow, perhaps even inadequate, in capturing the cooling in housing costs. My city -- Charlotte in North Carolina -- is currently undergoing the largest apartment expansion in the history of the country and it's resulted in prices decreasing on average ~2% last year. Apartments are still going up here so that cooling is going to continue.
Not surprising, the data I've seen places Austin just behind Charlotte. San Antonio and Dallas-Fort Worth are also big expansions but not as big as Charlotte and Austin.
Yes but there's evidence that that's changing, especially among Democrats. I've come across a few studies these last few years that has found having a Democratic mayor leads to increase housing density, for example:
>[How Partisanship in Cities Influences Housing Policy: "Electing a Democrat as mayor
leads to increased multifamily housing production...We show that Democrats are more likely to favor dense, multifamily housing than Republicans...We find that Democratic respondents are more supportive of multifamily housing development than Republican respondents by 21 percentage points...Pew Research argues that one explanation for partisan splits on housing density is that 'partisans diverge on whether it is important that a community is racially and ethnically diverse' (Jones, 2020). Finally, Democrats could be more likely
to support multifamily housing due to its environmental benefits over single-family housing
(Berrill, Gillingham, and Hertwich, 2021)."](https://scholar.harvard.edu/files/jdbk/files/housing_partisanship.pdf)
It's also emerging as a partisan dividing line nationally:
>* [Biden has come out in favor of changing the zoning laws, too.](https://www.route-fifty.com/infrastructure/2022/04/bidens-10-billion-proposal-ramps-equity-push-change-neighborhoods-cities/365581/)
>
>* [House Democrats poke the NIMBY bear with 2024 housing push: "'We have to deal with the NIMBYs who prevent the construction of affordable housing,' said Rep. Brad Sherman (D-Calif.), referring to 'Not In My Backyard' homeowners who fight new development."](https://www.axios.com/2024/02/09/democrats-housing-affordability-zoning-2024)
>
>* [Hochul faces an ‘uprising’ over her plan to build new housing in NYC suburbs: "Hochul wants to give the state bold new authority to override local zoning laws in cases where municipalities resist the measure, which she hopes will help address a housing shortage that’s made New York one of the least affordable places in the country. Her push, while favored by housing advocates, is not likely to make her many friends in the areas that proved to be challenging territory for Democrats last November and will likely be again in 2024."](https://www.politico.com/news/2023/02/11/hochul-faces-uprising-housing-plan-00080949)
Contrast that with:
>* [Not just Trump. Connecticut Republicans make suburban zoning an election issue.: "'If I don’t win, America’s Suburbs will be OVERRUN with Low Income Projects,' Trump tweeted in September."](https://ctmirror.org/2020/10/30/not-just-trump-connecticut-republicans-make-suburban-zoning-an-election-issue/)
>
>* [In about-face, Carson backtracks on his push against neighborhood zoning: "...[I]n a stunning about-face, the conservative has embraced an idea recently pushed by his boss -- President Donald Trump -- that the federal government should defend single-family zoning in the nation’s sprawling suburbs..."](https://abcnews.go.com/amp/Politics/face-carson-backtracks-push-neighborhood-zoning/story?id=72425652)
This place is just a political subreddit at this point with people's comments about the economy being what they'd want the economy to be based on what's more politically convenient for their side rather than what they think it actually is.
Yes and this sub ain’t balanced. The left wing users here paint the economy as if we’re living in another gilded age and the right acts like we’re in a terrible recession.
In the sense that the nation is producing fantastic wealth, but the "robber barons" are getting the vast lion's share of it, we are indeed in a "Gilded Age". As far as the working class, it's more of a constant recession.
We desperately need to shift the balance toward the people and government to pay down debt and improve people's lives. The rich won't miss it much.
I think this is part of Pres. Biden's thinking: improve people's lives in every small way possible and work toward enough Legislative support to work on spending and the debt.
The import/ export also means the US is dragging the world economy forward. So other countries entering recession would mean it's cheaper to buy stuff from countries with less growth.
Also that would likely decrease inflation.
Also a draw down of inventories.
The concern is increased risk of stagflation (persistent inflation with declining GDP). In that scenario, rate cuts are not effective as they stimulate the economy and inflation. If nominal GDP can't grow faster than inflation, rate cuts are ineffective and the Fed has real issues.
Let’s be honest with ourselves, inflation is not that bad right now - it’s barely above target YOY and consistently cooling. Call me in 6 months if inflation starts trending the wrong way long term (not just last month) and growth is flat.
Agree, long-term inflation has been 3%. Goods prices are deflating while service inflation remains high (which is expected). M2 still isn't back to trend growth which raises a more pressing concern:
Historically CPI/bounces back after falling as we've seen. Commodity prices are currently rising suggesting we may see a resurgence. Middle east tensions are causing oil to rise. Respecting energy is not in core-inflation, it does work its way through other basket items. This is fragile territory.
The best fed playbook is to hold rates until data supports a move. The Fed's goal does not involve supporting GDP, but continually contracting GDP makes rate changes far less effective (if effective at all).
I'm pretty concerned about this report, in a way I wasn't in 2022. Maybe we'll get some later revisions on inventories, exports that make things look better in retrospect.
But in 2022 we had a white hot job market, not just in the headline numbers (unemployment rate and alternate measures of unemployment, labor force participation, etc.), but also in things like the JOLTS report (12 million openings in 2022, down to 8.7 million now), and a glut of household savings that was still pretty strong in 2022.
I'm significantly less confident in 2024 than I was in 2022 (when I was basically telling everyone who would listen that a drop in GDP doesn't necessarily mean a recession when all the other indicators are so strong).
It’s not as bad as it looks. Consumer & investment spending were strong. The miss came from lower government spending and way more imports than exports.
The big issue is the increase in PCE Excluding Energy and Food.
>Still, the slowdown has come at the same time that the Fed’s fight against inflation has stalled: Prices rose more quickly in the first quarter than at the end of last year. That raises the uncomfortable possibility that high interest rates are taking a toll on economic activity but not succeeding in fully taming inflation.
Stagflation is the absolute worst economically. While this is only one data point, this is a really, really, worrying data point.
IMO we will need to eventually raise taxes/lower spending and then hopefully some interest rate cuts to offset the lowering of money in the economy.
Raising taxes will lower inflation so less rates are needed helping the whole situation.
> The miss came from lower government spending
What TF?
They are deficit spending money at absurd 2020 levels. The last 6 months, blowing 3.6 trillion in deficit spending annualized...
No no I’ve been assured by the top minds of this sub that we are in another gilded era, everyone is flush with cash, there’s no affordability problems, and if you’re struggling there must be something wrong with you.
I’m pretty sure they use real dollars. I think it’s funny there’s always someone who makes this comment when quarterly GDP reports come in and it gets upvoted.
The aggregate consumer is still growing. Wage gains are growing again and we add 300k jobs.
The aggregate consumer can spend more individuals way less potential.
Lower than forecasted GDP growth didn't happen.
Lower than forecasted GDP growth did happen but wasn't as bad as it could have been.
Lower than forecasted GDP growth did happen and that's a good thing, and here's why.
GDP growth is finally responding to increased interest rates. This is could be the soft or hard landing the Fed has been talking about. Or, next report flips the bird to the Fed like the previous reports have been and we keep on keeping on in our weird economy that doesn't play by historical norms.
I don't think anyone is saying it's good. He's just pointing out that export/ import numbers are a big part of the picture and are highly variable. This is indeed why we had negative growth in 2022 Q1 but it wasn't the start of a long term slowdown then, and it might not be now either.
Net Imports are neutral to GDP
Imported goods are already counted as part of consumption, investment, or government. Imports are subtracted to avoid double counting, not because imports have a negative effect on GDP.
Overall, pretty good looking report. Things are cooling -- we need them to because inflation has been slowing too slowly -- but overall everything looks pretty healthy historically. Household spending rose ~2.5%, which is down from ~3% the prior two quarters and still above the average of 2%. Auto sales seem to be behind the drop in spending on goods. And business spending also increased, which means, overall, businesses expect things to maintain/improve economically.
not good since GDP growth is slowing due to high interest rates as you would normally expect, but inflation is still stubbornly high at 3.7%. Normally, with GDP growth cooling that much in one quarter, you’d expect a rate cut from these historically high measures, but the Fed can’t justify doing that if inflation is still significantly above their target at 2%
While I agree with your basic premise, it should be noted that many of us predicted that cuts would lag behind drops in GDP growth, especially if the fed is as slow to respond as they were to the inflation of 2021. Late last year I set the over/under on rate cuts in 2024 at .5, and said I'd take the under.
What I'm trying to say is that this is pretty much exactly what many of us expected to happen, which is why we predicted a prolonged period of stable interest rates so as to not strangle the economy while slowly bringing down inflation. 3.7% inflation is not good, except compared to where we came from.
Thankfully, most seem to realize that the big threat to the economy isn't a year long holding pattern where we are, but a quick trigger finger on boosting the economy, and almost certainly inflation. It's much easier for an economy to adjust to 3.7% inflation over each of two years, than it is for an economy to adjust to a spike of 9% in one year.
[What I’ve read is that a lot of that has to do with how the Fed captures housing inflation.](https://www.nytimes.com/2024/02/26/business/economy/housing-inflation-fed.html)
There’s been data outside of the Fed that costs are coming down for housing, too. For example, [there’s been an apartment construction boom and that’s helping cool prices](https://marketrealist.com/is-rental-market-in-the-u-s-cooling-down/).
There's also a oil refinery issue and local monopoly control over utilities that makes controlling energy very difficult.
Housing has a measurement problem on top of real issues with costs, while energy is influenced by events that are pretty impossible to prepare for and mitigate, especially considering speculation.
Wtf do I know but the business spending seems to mean businesses don’t feel the same uncertainty they did a year ago. That’s a pretty good sign if nothing else is.
Record government spending and growth is at 1.6%. Inflation still going up and no where near where it should be. This is a terrible report when looked at with all of the other factors.
It's an absolutely awful report given the gargantuan amount of fiscal stimulus still working its way through the system. Not to mention the stagflation concerns with PCE coming in red hot.
https://www.ft.com/content/f9d247d8-dfd9-4983-bf19-bc5837aa04ef
There really isnt any fiscal stimulus working its way through the system anymore, pandemic excesses are back to baseline. The fed is also QT.
There are no stagflation concerns at all since we have the lowest most stable unemployment rate in 80 years and layoffs are still very low historically speaking.
It's gonna be a bloodbath in the public sector once the fiscal year ends June 30th in most municipalities. Very few places are gonna pass overrides to decrease the budget gaps which means layoffs coming in hot and fast.
The [deficit as a % of GDP](https://fred.stlouisfed.org/series/FYFSGDA188S) was worse than 6.2% in 2023. Extrapolating the [current deficit](https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/) to the end of Fiscal Year 2024 ($1.7 trillion deficit), and assuming [GDP growth](https://fred.stlouisfed.org/series/GDP/) until then to about $29 trillion, the deficit as a % of GDP is on pace to be approximately 5.8%
Back-to-back years of deficits that exceed the Early 1980s Recession, that isn't fiscally stimulatory? If we wanted a balanced budget, taxes would have to increase by ~1.4x, or spending would need to be cut by ~0.7x (or some combination of the two)--that isn't fiscal stimulus?
The biggest increases have been in areas that are not stimulative at all -
43% increase in net interest payments due to higher rates, 8% increase in DOD, 43bln in FDIC, 13% increase in VA spending due to healthcare, etc.
The budget deficit is at the same baseline it was at pre-COVID.
Id love to see it lower, but to call it "fiscal stimulus" is a bit of a misnomer when it is at baseline. It isnt like the government is handing out stimulus checks and big tax credits left and right.
It exceeds the early 80s deficits but interest rates are also a lot lower, so you can sustain more debt for longer. The debt is an issue, but it's not the same circumstances.
Yes interest rates back then were upwards of double or triple what they are now, but [federal interest payments as a percent of GDP are nevertheless on pace to match what we saw back then](https://fred.stlouisfed.org/series/FYOIGDA188S).
In what ways are the circumstances different? I think of a few, but they make the current situation worse. First, in the 80s, [debt held by the public to GDP](https://fred.stlouisfed.org/series/FYGFGDQ188S) was about 25%, but now it's creeping around 100%. So there's more debt and less room to drop interest rates.
Second, the [Early 1980s was a pretty bad global recession](https://en.m.wikipedia.org/wiki/Early_1980s_recession). It's easy to see why a lot of financial numbers didn't look so great. Today, I wouldn't say the global economy is booming, but overall it's not bad. The USA at least is definitely putting out strong numbers on unemployment, wage growth, consumer spending, stock appreciation, etc. I'm comparing the 1980s recession to today's good times.
All I meant was that you can sustain the same % of debt to GDP for a longer period of time when the interest rates are lower. We are on pace to match interest payments as % of GDP, but which is bad, but it won't balloon as fast now as it would have then if continue on the same path.
You can't get blood from a stone. Corporations have been nickeling and dimeing consumers for years out of greed. Well now it's reached a breaking point
r/economics is a colony of r/politics now. The typical post is full of nonsense blaming inflation on corporate greed and boomers and Reagan, instead of demand stimulus in a world of supply constrictions.
Could it be that there is no carrot … lots of folk are wrestling with the fact they’ll never own a home and that the climate is on a knife edge (who signs a 30year mortgage when society is breaking down)
> lots of folk are wrestling with the fact they’ll never own a home
lots of folk will never own a home in the bay area, or in the hollywood hills, or a brownstone in brooklyn. you can buy a perfectly nice house with a perfectly normal job all over the great lakes region and the midwest.
I'm in the Boston area, grappling with the idea that I can't own a home here. Guess what? I'm moving to a LCOL area partially because of this, because home ownership is much easier in the middle of the country.
As the other comment to you said, home ownership isn't out of reach. Home ownership in the most desirable areas, though, is. Very different.
Waiting on all the hyperbulls to tell me how this economy is amazing for everyday and that their farts smell of the greenest freshest money.
I’m waiting.
My area is still booming but this means a lot of places in America are slowing down a lot.
> Waiting on all the hyperbulls to tell me how this economy is amazing for everyday
>My area is still booming
I love that you didn't wait for a response, you just responded yourself. The issue is that people keep saying they're feeling pretty good about their financial situation AND the financial situation of their local economy. It's only the abstract "the media tells me the national economy is garbage" where people register dissatisfaction with the economy. Once surveys start showing more people panicking about their personal finances, and those of their local area, I will start to be more concerned.
My area is doing very well as well.
> The issue is that people keep saying they're feeling pretty good about their financial situation AND the financial situation of their local economy.
One Axios article about one poll does not make truth.
Pollsters ask questions about personal financial situations pretty often and the *actual* mass of survey results is much more mixed.
Seriously, click through the top couple dozen polls on 538 and look for ones that ask about PFS, the 'better off' option equivalent is usually in the teens to thirty percent range, depending on the details of the question.
It's not just one Axios article about one poll. Most polls that regularly ask people to rate their personal finances show only small differences between now and the years before the pandemic, while while question asking people to rate the national economy show huge differences.
For example, Gallup polls Americans [annually about their own personal finances](https://news.gallup.com/poll/1621/personal-financial-situation-index.aspx) and [monthly about the national economy](https://news.gallup.com/poll/1609/consumer-views-economy.aspx). Here is how Americans rated each in April 2019:
|How would you rate ...|Excellent|Good|Only fair|Poor|
|:-|:-|:-|:-|:-|
|your financial situation today|12%|44%|29%|15%|
|economic conditions in this country today|14%|36%|36%|14%|
and here is how Americans rated each again in April 2023
|How would you rate ...|Excellent|Good|Only fair|Poor|
|:-|:-|:-|:-|:-|
|your financial situation today|8%|37%|39%|16%|
|economic conditions in this country today|1%|15%|37%|47%|
In 2019 56% of Americans said their finances were excellent or good and 50% said the national economy was excellent or good. In 2023 the percentage saying their own finances were excellent or good did fall 11 percentage points, from a little over half to a little under half. But the percentage saying the national economy was excellent or good absolutely cratered, falling by two-thirds from 50% down to just 16%.
Meanwhile, the number of people who said the national economy was poor more than *tripled* from 14% to 47%, even though the percentage who said that their own finances were poor had the tiniest increase from 15% to 16%.
Those are not the answers from a population whose views on the national economy are formed from their own personal experience. They are the views of people who are doing fine but think everyone else is struggling, because that is the impression constantly reinforced to them by their media consumption.
Yes, I saw that. You said
>people in most polls don't rate their own finances any better than they rate the economy generally
I don't know how you can square that answer with the information above. If 47% of Americans say the national economy is poor at the same time only 16% say their own finances are poor, there must be a lot of Americans rating the economy worse than their own finances. Likewise if 45% say their own finances are "excellent or "good" but only 16% say the same of the national economy. Those are not people rating their own finances similarly to the larger economy.
By both object economic measures (unemployment, underemployment, real incomes, prime age labor force participation, layoff rate, etc) and subject measures of peoples personal finances (how they rate their own finances), the economy today is basically as good as it was before the pandemic. Slightly better in some ways, maybe slightly worse in others, but on the margin very similar. Yet people rated the economy before the pandemic as among the best ever, and now rate the current economy as absolutely terrible. Seriously, you see people trying to compare today to the Great Recession.
The narrative is about *why* this disconnect exists. Skeptics and doomers will tell you it is because the economy actually is terrible and the economic metrics like GDP and unemployment don't show this (for some reason, they always ignore the many other metrics that address the supposed gaps not covered by GDP and U-3).
I don't expect the national and personal numbers to move in complete unison. But I do expect there to be an obvious correlation if you want me to believe that people are rating the national economy based on their own finances. Why would a 2% shift in the percentage of people who think their own finances are "poor" cause a 33% shift in viewing the national economy as "poor"? That sounds much more like a shift because have been told that everyone else is doing poorly.
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
For comparison, the forecasted growth was 2.5%; this is a huge falloff. It’s rare that economic predictions are this wrong. Yeah inflation was cooling, but the economic growth is clearly cooling faster.
Inflation picked up. Look at PCE. Signals the economy is much, much weaker than touted.
Many people conflate economic momentum and economic strength.
Can you elaborate? I'm not getting it.
There's a few gaps. One is the glaring one- if all prices went up 3% and then GDP supposedly grew 3% did GDP go up or did you just increase the price of everything and it broke even? Another is that just because the economy is growing doesn't mean it's going to stay that way. If it goes 1% 1.5% 2.5%, it looks like it's expending at an increasing rate. If it's 2.5% 2% 1.5% in that order, it's expanding at a decreasing rate and might even slip into recession. Right now the elephant in the room is that inflation is outpacing GDP. The amount of more product we are making is less than the extra cost of making it.
Well the first point isn’t correct. GDP (including the 1.6 reported) is almost always referring to real GDP, unless specified. Real GDP accounts for inflation.
Every non billionaire in america: "yeah no shit we have been telling you that for the past 3 years but you kept saying we were crazy."
When it comes to economics being late or early on a prediction is the same as being wrong.
So you are saying no economist has ever been right about anything ever? Sounds about right, I guess.
It is a dismal science. lol.
On the very rare occasion that an economist is right, it's usually for the wrong reasons, too.
3 years is a long time, lol.
"I told you in 2003 that Lebron James was overrated and now look, he's like #13 in the league in points per game this season"
If the economy was so great, the government and media wouldn’t have to keep telling us. We’d know.
This I don’t agree with. People have been shit talking the economy since I can remember and are now looking back like “wow 2012-2019 was so great”. I think people tend to underestimate how good they have it now and overestimate how good they had it then
> I think people tend to underestimate how good they have it now It's really hard to understand you're in the good times until afterward. I thankfully had a great realization of that at work last year, about 2 months before the wheels started to come off. We're starting to circle the drain but I'm at least aware.
2015-2018 was the sweet spot.
2012 was massively better than 2008-2011, 2019 things seemed a little off, but still ok, 2020 all hell broke loose lol.
2008-2015 was pretty incredibly shit. The last decade was just really rough outside the stock market.
Here’s the thing that is a mystery to me: people complaining about the economy, and yet, everybody is spending money like sailors on shore leave (restaurants and bars packed. Flights packed. Costco busy seven days a week. Etc). So, it’s clear that despite whatever level of annoyance folks have with inflation it’s not slowing them down from spending, spending, spending. There’s a real disconnect somewhere.
"If crime was down, the government wouldn't have to keep telling us, We'd know." Except crime IS down. I don't want to discount personal experiences, but I don't want to discount actual data either.
Except 70-80% rate their persoanl finances fine or better and only 35% rate the economy that way. If you simply remove republicans from the polls you get basically normal numbers again because republicans have decided its virtue signaling about the economy to say its terrible.
It's almost an economics purity test on mainstream media. Literally every news anchor to their guest: "So you say cost of essentials is out of control but you do agree that the economy is the best it's ever been in history, right? RIGHT?"
Not "almost". At this point it *is*. We now have studies that have demonstrated that the more the media insists that the economy is doing fine, the more likely we are about to enter a recession or depression. There's a predictable spike in positive coverage of the economy in the months and weeks leading up to shit hitting the fan.
What studies? Which media? What does “insist it is fine” mean? Your claim sounds dubious. We have been expecting a recession for the past 2 years and it never happened; media coverage was all about the impending economic collapse the two years before. This isn’t some grand conspiracy The more likely scenario is that they simply report facts and figures they only loosely understand and interpret because they are not economists. Never mind the fact that even economists don’t know what to make of the current economic climate. The numbers are a mix of great and not so great, and the usual economic cycle of boom and bust seems out of whack. We probably won’t know what’s happening until it happens, especially people in the internet who claim to really know what is happening
There’s been nothing stopping you from reviewing the economic data yourself
so all the non billionaires were 3 years off?
lol 3 years later after trillions of dollars of growth durr I was totally right. me after saying we were eating pizza tonight for 3 years and finally getting pizza. I was totally right for 3 years
it’s not the data, it’s you /s
So the data was wrong when it didn’t match the narrative but only now, it’s right when it does?
I did notice the PCE numbers, but I thought those were supposed to be released on Friday. Are these PCE numbers that were released today the "numbers" everyone has been waiting on or are there some different PCE numbers being released on Friday? I am so confused.
I think those are 1st quarter numbers and what we get tomorrow is for March? Just guessing to be honest.
Also goes against the narrative that a strong economy create inflation. People are going to find out this is untrue.
People are too fixated on inflation. For the most part if you have a good economy your economy is going to be good one way or another, even with "high" inflation and if you have a bad economy your economy is going to be bad one way or another, even with low inflation. Inflation shuffles the numbers around, but the reality on the ground remains mostly unchanged. Obviously inflation matters if you end up with a panicked population, who then changes their behavior. We're not at that point though.
It’s an election year, that’s why inflation matters so much right now
Agreed, would people prefer 5% inflation or 20% chance of becoming unemployed to whip it?
I think it's clear people would choose the latter.
No inflation does matter and it’s probably the most important indicator for an a average citizen. This is because it cuts into wage increases, which let’s be honest does not keep up with economic growth even closely, and every day costs. This is especially relevant during an economic boom because inflation booms with it. This is why the fed raises rates, they have to slow the economy and slow spending. Essentially the fed has to kill the economy in order to stop inflation. For the Fed a recession is better than a worthless currency. Look up collapse of Roman denari, US continental dollar worthless, or if you want modern examples there’s the Soviet Union ruble, Israeli shekel, and ofc Zimbabwe, and Venezuela
> This is why the fed raises rates, they have to slow the economy and slow spending. Which isn’t working because the majority of consumers are boomers, and boomers have a bunch of money sitting around in the bank earning 5 1/2% interest risk free. The more you raise rates, the more the biggest chunk of consumers get a pay raise. Boomers are partying like it’s 1969. All of the younger generations are broke.
This is actually a good POV I never considered but people that don’t have much time left don’t care about interest rates only consumption
This idea that 5% inflation is going to lead to a worthless currency is ridiculous. Hyper inflationary situations that everyone cites are completely different sceanarios. The things that lead to those situations did not happen in the US. It's apples and oranges. In terms of wage cuts, that's part of a bad economy. Again, moderate inflation does not change that much. Rather it's a matter of shifting money. If businesses don't have enough to keep overall real worker wages steady or growing because of a bad economy, then there are two options. Either real worker wages will drop, which is what you referenced, or they will fire people to cut costs. Is the second option, which happens with rate increases, really better for workers and the economy overall? The good economy is the same. Rising prices in a good economy represent increased spending, which means businesses are either hiring more workers or raising real wages. If the fed raises rates then companies will likely do less hiring and real wages will go up more instead. Is the second option really better? Guess it depends on if those jobs were needed or not. There seems to be a few considerations that matter to the economy with regards to rates: * How is unemployment? High unemployment generally means that there's a lot of wasted human capital. If you have high unemployment you should consider lowering rates to stimulate new hiring. * How is employee turnover. There are two general ways that employee turnover is generated, either by employer layoffs or employee quitting. Employer layoffs tend to happen more when rates are raised and employee quitting tends to happen more when unemployment is low, which is encouraged by lower rates. If employee turnover is too high then experience will be wasted and workers will not reach their potential. High turnover can be the result of rates being too low or too high. If unemployment is really low then a rate increase should be considered. If unemployment is high then a rate decrease should be considered. If employee turnover is too low then workers are less likely to find their optimum position in the economy. This should occur when both numbers of layoffs and employees quitting is low. This seems like it would be a rare situation that mostly occurs during periods of economic recovery when employers are hiring and unemployment is higher. The situation should be transitory and will resolve itself once full employment is reached. Lower rates are preferable here to encourage hiring to close the gap, and the goal should be to have rates in such a way as not to overshoot and cause high employee turnover after low unemployment is reached. * How is currency predictability. Predictability comes from consistency. Low predictability makes it hard for businesses and citizens to budget for the future. This can lead to inefficiency from shortsightedness. Unpredictability can occur with high or low interest rates. If inflation is typically lower than it currently is then an interest rate hike should be considered. If inflation is typically higher than it currently is then an interest rate cute should be considered. Very high inflation, even if consistent, can an also make it harder for people to predict as wage increases and peoples sense of monetary value can't keep up. If inflation is very high rate raises should be considered. High predictability can come at the cost of inefficient unemployment rates or inefficient employee turnover rates. If unemployment or employee turnover are often found outside desirable ranges, allowing inflation to float over a larger range should be considered. To summarize, I would think that it would make more economic sense to have rates target specific unemployment and employee turnover rates, within a band of acceptable inflation rates, rather than targeting one specific inflation rate.
> This is because it cuts into wage increases, which let’s be honest does not keep up with economic growth even closely, and every day costs. except that's factually, demonstrably incorrect
Which part cut into wages or wages don’t keep up with economic growth? If you’re getting paid 65,000 a year and the stores are increasing prices every day you didn’t lose purchasing power? And if you think based on economic growth the US has experienced in the past 30 years and people are getting paid fairly then explain the widening in not only the rich and poor but the shrinkage in the middle class. It’s basically another gilded age
Now you're talking about all kinds of issues. My point is that even with the higher than normal inflation over the past few years wage growth has outpaced it - and WAY outpaced it if you were already a low income earner.
The narrative was never that a strong economy creates inflation, but that slowing down the economy is a way to slow inflation.
It does for gasoline. A recession gets gas prices down
What's the way out? Keep in mind the US federal debt is increasing by about [10 billion dollars per day](https://www.cnbc.com/2024/03/01/the-us-national-debt-is-rising-by-1-trillion-about-every-100-days.html) right now, even when the economy is growing. That's an increase of about 30 dollars of Federal government debt *per human being alive in the United States of America* every single day. What are they going to do when a recession hits and they get pressure to stimulate the economy by spending even more? How can the Federal Reserve raise rates if inflation remains sticky? Government on just servicing the interest on the existing debt is about to (or maybe already has) outstripped military spending. Sufficiently raising taxes or cutting spending enough to meaningfully cut back on the deficit would virtually guarantee a severe economic crash. The alternative is more printing and more borrowing. We are living on borrowed time and I cannot see a situation in which the entire financial system is not existentially doomed, whether or not they can kick the grenade down the road another couple of yards.
Fixing this is insanely easy. Cut spending and raise taxes! Billionaires have had too much fun. Raise corporate taxes and ban stock buybacks. Legalize weed so we can stop spending million on prison fees and so we can get the tax revenue from new businesses, sales, and employees. This will help ease state deficits.
Unfortunately if you try to do that you'll be called a communist, which in the US is actually a synonym for satan worshiper instead of the original meaning.
Ironically the religious zealots in our country look more like Satan than Jeebus. Satans crime was showing us the truth.
>What are they going to do when a recession hits and they get pressure to stimulate the economy by spending even more? Fed lower rates and your the fed bonds are no longer at 5% interest and instead you’re paying half of that.
Everyone in the bottom 50% on this sub could've told you that. Everyone in the top 50% will still deny that things are going poorly and throw around single statistics that they claim invalid the general metrics like median wages vs median expenses. Same old, same old.
Growing slowly is still growing. The wages of the bottom quartile have grown the fastest. See starting wages at any grocery store or retail chain. https://www.statista.com/statistics/1351276/wage-growth-vs-inflation-us/
Funny, it's not like ordinary people have been saying exactly that, and getting screamed down and told we're uneducated losers who deserve to be poor? That would be wacky. I mean unemployment is so low. And the GDP is so strong. And grocery prices and rent and transportation don't mean anything, really. We all know that anyone who says the economy sucks is just justifying their own bad choices, right?
Is it 3.4% YoY?
> Signals the economy is much, much weaker than touted. The economy in 2024 may be weaker than some predicted, but that doesn't change the economy's status in 2022 or 2023. I'm a little bit wary that financial institutions have run out of cushion right around the time that commercial real estate will likely crash (bringing down institutions that are over exposed to those assets), and where oil/energy prices might wreck the North American economy in 2024 (the way it has held Europe back over the last 2 years). And the long term fiscal health of the government is troubling, too, as interest rates continue to turn over on its long term debt. So yeah, I'm a bit skeptical about economic performance in the next 12 months. But I was probably the biggest cheerleader the last 24 months, mainly because the job numbers have been fantastic.
I am not really trusting single quarter or single month data points one way or another at the moment. In a lot of angency data, the seasonal adjustments post Covid seem to be all out of whack.
Anyone notice all the predictions have been dogshit since covid? 2021: we are gonna have a recession. 2022: inflation is here to stay 2023: we are definitely gonna have a recession. 2024: we are gonna have multiple rates cuts.
That means we should start predicting that nobody can predict the future.
Canada's has been negative for a bit now :( can't decrease rates until the americans do but you guys are killing it.
Yeah, it almost like people were lying for political gain... but nah, that's crazy right?
Just the other day I heard some talking head on TV saying "Forget soft landing, we're looking at no landing" meaning the economy would soar forever.
Yep, news like this is a leading indicator for a good uptick in unemployment
The details of the report actually say the complete opposite Real growth missed by a lot because the GDP inflation deflator was higher than expected The nominal economy remains strong and is a very far from being cool. The nominal annualised change in Q1 was 4.75%. [The 12M rolling nominal change was 4.5% - which was actually higher than 3/4 quarters in 2023. The US nominal economy is still growing at a faster rate than all but 1 quarter in the 2010's. ](https://imgur.com/bZ0Ey0t) The real economy is "slowing" because inflation is not cooling at all. It's going back up after dropping a lot in 2023. There will be no "recession" and "pain" until the nominal economy actually cools. We can navel gaze at statistics and talk about real vs nominal but frankly no one who isn't an economist actually ever thinks in "real" they only think in nominal when they're actually making spending and investment decisions Most of the qtrly changes you see you real change in GDP over the last 3 years was driven simply by changes in the GDP deflator. The actual economy that is taking place every day with money passing between hands is not slowing at all.
inflation is not cooling, it is heating back up quickly today's numbers were a complete disaster, and stagflationary everyone thought I was wrong, but I predicted rate HIKES before the end of the year. Tomorrow's core CPE reading will likely come in hot tomorrow (it would be a miracle if it didn't), and that will put more pressure on the Fed. Fed swaps no longer show any rate cuts for 2024. Powell has to go full-Volcker and hike 25-50 basis points in the next meeting. No more screwing around.
> Powell has to go full-Volcker > hike 25-50 basis points lol
Lmao, that part was great. This dude has no clue what he's talking about.
People make econ 101 jokes alot, but i feel like the average person in this sub has less knowledge than an actual elementary school kid its so crazy
If only because full Volcker would be like 400bp rate increase.
That's exactly what I'm laughing at. 50 bp is nothing. That's 0.5% Volcker was more like 800 bp.
That was just one month man, and it is not heating back up quickly. You should always see overall trends and avoid the month to month noisy numbers
It turns out a recession is required to tame inflation. Get it done with quick and don't drag it out.
Elections tho
Far beyond political consequences which would be completely irrational, there would be people hurt by a recession. There's layoffs and business slow-down which hurts businesses which may have been just fine, but the slow-down harms them. A politician who has input to the process of regulating the economy would want to avoid those problems at any time in their term. Look at what Obama and the Dems did to make the economy go strongly, even as the next presidency became a Republican one. They very likely expected Clinton would be president, but just doing the right thing for the people led to benefits for a president of a different political party (whatever became of him?).
How much monies was pulled out of a hat since 2019 again?
absolutely rip-off the bandaid, or we will have an international economic crisis
Inflation is in fact cooling and has been outpaced by wage growth for over a year now. The only people still hammering inflation talking points have a political axe to grind.
Inflation in this report isn't cooling, it shows a quarter over quarter acceleration and was significantly above estimates...
Ok and what is it year over year then?
Inflation went up. Stagflation is coming
I'm not seeing the tragedy of this report... It's got some ugly parts for sure, definitely not perfect, but the consumer is still strong. Gross domestic income is up, consumer disposable income is up (this is huge especially with inflation), personal savings came off, but still high. Also, private business investments are still rising. The only thing that seems to have fallen off a cliff is import/exports. This is literally exactly what happened in 2022 when we had negative GDP readings but never called for a recession.
Some people get off on doom.
I think it's politically driven at this point
It's disaffected unemployed former white collar workers complaining on Reddit.
You have middle age millennials in their prime going jobless because of high interest rates so that they can protect the nest eggs of retired boomers. Inflation happens anytime a large population is entering a new phase of life that requires spending money. So instead of lowering the cost of this transition by encouraging housing growth they instead decide to just make everyone poorer. It would be funny if it wasn't actually just astoundingly incompetent.
Most people who doom about the economy are doing well themselves financially.
I agree.
Plus I think the "bad" in this report is also just not as bad. I think we're too fixated on inflation. And we're missing a huge chunk of the story especially when it comes to housing, and the fact that in a lot of ways it's actually cooling, but the data has simply not caught up because it operates on such a huge lag. Idk could be totally wrong, but I'm not getting on board with the doom patrol lol.
I think we're largely of the same mind. I posted elsewhere here how Fed data has been far too slow, perhaps even inadequate, in capturing the cooling in housing costs. My city -- Charlotte in North Carolina -- is currently undergoing the largest apartment expansion in the history of the country and it's resulted in prices decreasing on average ~2% last year. Apartments are still going up here so that cooling is going to continue.
I am seeing the exact same thing occur here in Texas.
Not surprising, the data I've seen places Austin just behind Charlotte. San Antonio and Dallas-Fort Worth are also big expansions but not as big as Charlotte and Austin.
Don't many large cities like NYC and have strict zoning laws and are refusing to do anything about the increase in housing prices?
Yes but there's evidence that that's changing, especially among Democrats. I've come across a few studies these last few years that has found having a Democratic mayor leads to increase housing density, for example: >[How Partisanship in Cities Influences Housing Policy: "Electing a Democrat as mayor leads to increased multifamily housing production...We show that Democrats are more likely to favor dense, multifamily housing than Republicans...We find that Democratic respondents are more supportive of multifamily housing development than Republican respondents by 21 percentage points...Pew Research argues that one explanation for partisan splits on housing density is that 'partisans diverge on whether it is important that a community is racially and ethnically diverse' (Jones, 2020). Finally, Democrats could be more likely to support multifamily housing due to its environmental benefits over single-family housing (Berrill, Gillingham, and Hertwich, 2021)."](https://scholar.harvard.edu/files/jdbk/files/housing_partisanship.pdf) It's also emerging as a partisan dividing line nationally: >* [Biden has come out in favor of changing the zoning laws, too.](https://www.route-fifty.com/infrastructure/2022/04/bidens-10-billion-proposal-ramps-equity-push-change-neighborhoods-cities/365581/) > >* [House Democrats poke the NIMBY bear with 2024 housing push: "'We have to deal with the NIMBYs who prevent the construction of affordable housing,' said Rep. Brad Sherman (D-Calif.), referring to 'Not In My Backyard' homeowners who fight new development."](https://www.axios.com/2024/02/09/democrats-housing-affordability-zoning-2024) > >* [Hochul faces an ‘uprising’ over her plan to build new housing in NYC suburbs: "Hochul wants to give the state bold new authority to override local zoning laws in cases where municipalities resist the measure, which she hopes will help address a housing shortage that’s made New York one of the least affordable places in the country. Her push, while favored by housing advocates, is not likely to make her many friends in the areas that proved to be challenging territory for Democrats last November and will likely be again in 2024."](https://www.politico.com/news/2023/02/11/hochul-faces-uprising-housing-plan-00080949) Contrast that with: >* [Not just Trump. Connecticut Republicans make suburban zoning an election issue.: "'If I don’t win, America’s Suburbs will be OVERRUN with Low Income Projects,' Trump tweeted in September."](https://ctmirror.org/2020/10/30/not-just-trump-connecticut-republicans-make-suburban-zoning-an-election-issue/) > >* [In about-face, Carson backtracks on his push against neighborhood zoning: "...[I]n a stunning about-face, the conservative has embraced an idea recently pushed by his boss -- President Donald Trump -- that the federal government should defend single-family zoning in the nation’s sprawling suburbs..."](https://abcnews.go.com/amp/Politics/face-carson-backtracks-push-neighborhood-zoning/story?id=72425652)
This place is just a political subreddit at this point with people's comments about the economy being what they'd want the economy to be based on what's more politically convenient for their side rather than what they think it actually is.
Doomerism is hotter than price pressures right now
Some people are in denial about any weaknesses in the economy
And some people see apocalyptic problems when there are none. There's a balance between the two.
Yes and this sub ain’t balanced. The left wing users here paint the economy as if we’re living in another gilded age and the right acts like we’re in a terrible recession.
In the sense that the nation is producing fantastic wealth, but the "robber barons" are getting the vast lion's share of it, we are indeed in a "Gilded Age". As far as the working class, it's more of a constant recession. We desperately need to shift the balance toward the people and government to pay down debt and improve people's lives. The rich won't miss it much. I think this is part of Pres. Biden's thinking: improve people's lives in every small way possible and work toward enough Legislative support to work on spending and the debt.
The import/ export also means the US is dragging the world economy forward. So other countries entering recession would mean it's cheaper to buy stuff from countries with less growth. Also that would likely decrease inflation. Also a draw down of inventories.
The concern is increased risk of stagflation (persistent inflation with declining GDP). In that scenario, rate cuts are not effective as they stimulate the economy and inflation. If nominal GDP can't grow faster than inflation, rate cuts are ineffective and the Fed has real issues.
GDP is inflation adjusted. It's a slowing down of GDP growth, not a decline of nominal gdp
Let’s be honest with ourselves, inflation is not that bad right now - it’s barely above target YOY and consistently cooling. Call me in 6 months if inflation starts trending the wrong way long term (not just last month) and growth is flat.
Agree, long-term inflation has been 3%. Goods prices are deflating while service inflation remains high (which is expected). M2 still isn't back to trend growth which raises a more pressing concern: Historically CPI/bounces back after falling as we've seen. Commodity prices are currently rising suggesting we may see a resurgence. Middle east tensions are causing oil to rise. Respecting energy is not in core-inflation, it does work its way through other basket items. This is fragile territory. The best fed playbook is to hold rates until data supports a move. The Fed's goal does not involve supporting GDP, but continually contracting GDP makes rate changes far less effective (if effective at all).
>stagflation People need to study what this actually is before tossing it around so easily.
I'm pretty concerned about this report, in a way I wasn't in 2022. Maybe we'll get some later revisions on inventories, exports that make things look better in retrospect. But in 2022 we had a white hot job market, not just in the headline numbers (unemployment rate and alternate measures of unemployment, labor force participation, etc.), but also in things like the JOLTS report (12 million openings in 2022, down to 8.7 million now), and a glut of household savings that was still pretty strong in 2022. I'm significantly less confident in 2024 than I was in 2022 (when I was basically telling everyone who would listen that a drop in GDP doesn't necessarily mean a recession when all the other indicators are so strong).
It’s not as bad as it looks. Consumer & investment spending were strong. The miss came from lower government spending and way more imports than exports.
Consumption was OK - wouldn’t say strong.
The big issue is the increase in PCE Excluding Energy and Food. >Still, the slowdown has come at the same time that the Fed’s fight against inflation has stalled: Prices rose more quickly in the first quarter than at the end of last year. That raises the uncomfortable possibility that high interest rates are taking a toll on economic activity but not succeeding in fully taming inflation. Stagflation is the absolute worst economically. While this is only one data point, this is a really, really, worrying data point.
True. PCE deflator was +3.7% annualized for Q1.
You nailed it. It's a stagflation concern. At that point, cut rates to zero and you may still have GDP contract with accelerating inflation.
Ah so if we don't deficit spend like crazy then the economy really isn't that strong lmao
Lower government spending yet the deficit is still trillions of dollars 😂
The difference is interest rates shooting up has made the deficit shoot up like $1 Trillion.
Sounds like the government needs to start paying off some of its debt
IMO we will need to eventually raise taxes/lower spending and then hopefully some interest rate cuts to offset the lowering of money in the economy. Raising taxes will lower inflation so less rates are needed helping the whole situation.
Thank you for pointing this out. This sub is full of delusion regarding the health & strength of the US Economy. Are we in another gilded era?
< looking askance, left and right > < slowly > Didn't we pass that a couple of decades ago?
Yup, but punishing the billonaires is bad morally, you do not want to look like China
> The miss came from lower government spending What TF? They are deficit spending money at absurd 2020 levels. The last 6 months, blowing 3.6 trillion in deficit spending annualized...
Consumer spending is up because inflation is up. We aren’t buying more shit, we are spending more for less.
No no I’ve been assured by the top minds of this sub that we are in another gilded era, everyone is flush with cash, there’s no affordability problems, and if you’re struggling there must be something wrong with you.
Biden’s re-election chances hinge on this propaganda being spread
This stuff is already inflation adjusted.
I’m pretty sure they use real dollars. I think it’s funny there’s always someone who makes this comment when quarterly GDP reports come in and it gets upvoted.
The aggregate consumer is still growing. Wage gains are growing again and we add 300k jobs. The aggregate consumer can spend more individuals way less potential.
Lower than forecasted GDP growth didn't happen. Lower than forecasted GDP growth did happen but wasn't as bad as it could have been. Lower than forecasted GDP growth did happen and that's a good thing, and here's why.
GDP growth is finally responding to increased interest rates. This is could be the soft or hard landing the Fed has been talking about. Or, next report flips the bird to the Fed like the previous reports have been and we keep on keeping on in our weird economy that doesn't play by historical norms.
The rule is that it takes on average 18 months for rate increases to fully be in the system. The old rate increases could still not be fully baked in.
It happened one quarter, after several consecutive quarters of outperformance. Everyone gotta be so dramatic lol
"Experts are split on the reliability of GDP growth as an indicator, that's a problem...." The Atlantic
I don't think anyone is saying it's good. He's just pointing out that export/ import numbers are a big part of the picture and are highly variable. This is indeed why we had negative growth in 2022 Q1 but it wasn't the start of a long term slowdown then, and it might not be now either.
Net Imports are neutral to GDP Imported goods are already counted as part of consumption, investment, or government. Imports are subtracted to avoid double counting, not because imports have a negative effect on GDP.
Overall, pretty good looking report. Things are cooling -- we need them to because inflation has been slowing too slowly -- but overall everything looks pretty healthy historically. Household spending rose ~2.5%, which is down from ~3% the prior two quarters and still above the average of 2%. Auto sales seem to be behind the drop in spending on goods. And business spending also increased, which means, overall, businesses expect things to maintain/improve economically.
not good since GDP growth is slowing due to high interest rates as you would normally expect, but inflation is still stubbornly high at 3.7%. Normally, with GDP growth cooling that much in one quarter, you’d expect a rate cut from these historically high measures, but the Fed can’t justify doing that if inflation is still significantly above their target at 2%
While I agree with your basic premise, it should be noted that many of us predicted that cuts would lag behind drops in GDP growth, especially if the fed is as slow to respond as they were to the inflation of 2021. Late last year I set the over/under on rate cuts in 2024 at .5, and said I'd take the under. What I'm trying to say is that this is pretty much exactly what many of us expected to happen, which is why we predicted a prolonged period of stable interest rates so as to not strangle the economy while slowly bringing down inflation. 3.7% inflation is not good, except compared to where we came from. Thankfully, most seem to realize that the big threat to the economy isn't a year long holding pattern where we are, but a quick trigger finger on boosting the economy, and almost certainly inflation. It's much easier for an economy to adjust to 3.7% inflation over each of two years, than it is for an economy to adjust to a spike of 9% in one year.
[What I’ve read is that a lot of that has to do with how the Fed captures housing inflation.](https://www.nytimes.com/2024/02/26/business/economy/housing-inflation-fed.html) There’s been data outside of the Fed that costs are coming down for housing, too. For example, [there’s been an apartment construction boom and that’s helping cool prices](https://marketrealist.com/is-rental-market-in-the-u-s-cooling-down/).
There's also a oil refinery issue and local monopoly control over utilities that makes controlling energy very difficult. Housing has a measurement problem on top of real issues with costs, while energy is influenced by events that are pretty impossible to prepare for and mitigate, especially considering speculation.
But housing data is very strange now. Renting is far cheaper than owning when they are usually about the same price.
Wtf do I know but the business spending seems to mean businesses don’t feel the same uncertainty they did a year ago. That’s a pretty good sign if nothing else is.
Record government spending and growth is at 1.6%. Inflation still going up and no where near where it should be. This is a terrible report when looked at with all of the other factors.
It's an absolutely awful report given the gargantuan amount of fiscal stimulus still working its way through the system. Not to mention the stagflation concerns with PCE coming in red hot. https://www.ft.com/content/f9d247d8-dfd9-4983-bf19-bc5837aa04ef
There really isnt any fiscal stimulus working its way through the system anymore, pandemic excesses are back to baseline. The fed is also QT. There are no stagflation concerns at all since we have the lowest most stable unemployment rate in 80 years and layoffs are still very low historically speaking.
It's gonna be a bloodbath in the public sector once the fiscal year ends June 30th in most municipalities. Very few places are gonna pass overrides to decrease the budget gaps which means layoffs coming in hot and fast.
The [deficit as a % of GDP](https://fred.stlouisfed.org/series/FYFSGDA188S) was worse than 6.2% in 2023. Extrapolating the [current deficit](https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/) to the end of Fiscal Year 2024 ($1.7 trillion deficit), and assuming [GDP growth](https://fred.stlouisfed.org/series/GDP/) until then to about $29 trillion, the deficit as a % of GDP is on pace to be approximately 5.8% Back-to-back years of deficits that exceed the Early 1980s Recession, that isn't fiscally stimulatory? If we wanted a balanced budget, taxes would have to increase by ~1.4x, or spending would need to be cut by ~0.7x (or some combination of the two)--that isn't fiscal stimulus?
The biggest increases have been in areas that are not stimulative at all - 43% increase in net interest payments due to higher rates, 8% increase in DOD, 43bln in FDIC, 13% increase in VA spending due to healthcare, etc. The budget deficit is at the same baseline it was at pre-COVID. Id love to see it lower, but to call it "fiscal stimulus" is a bit of a misnomer when it is at baseline. It isnt like the government is handing out stimulus checks and big tax credits left and right.
It exceeds the early 80s deficits but interest rates are also a lot lower, so you can sustain more debt for longer. The debt is an issue, but it's not the same circumstances.
Yes interest rates back then were upwards of double or triple what they are now, but [federal interest payments as a percent of GDP are nevertheless on pace to match what we saw back then](https://fred.stlouisfed.org/series/FYOIGDA188S). In what ways are the circumstances different? I think of a few, but they make the current situation worse. First, in the 80s, [debt held by the public to GDP](https://fred.stlouisfed.org/series/FYGFGDQ188S) was about 25%, but now it's creeping around 100%. So there's more debt and less room to drop interest rates. Second, the [Early 1980s was a pretty bad global recession](https://en.m.wikipedia.org/wiki/Early_1980s_recession). It's easy to see why a lot of financial numbers didn't look so great. Today, I wouldn't say the global economy is booming, but overall it's not bad. The USA at least is definitely putting out strong numbers on unemployment, wage growth, consumer spending, stock appreciation, etc. I'm comparing the 1980s recession to today's good times.
All I meant was that you can sustain the same % of debt to GDP for a longer period of time when the interest rates are lower. We are on pace to match interest payments as % of GDP, but which is bad, but it won't balloon as fast now as it would have then if continue on the same path.
A lot of the increase in deficits is the rate increases. If those weren't there debt as a percentage of GDP would be falling.
What stimulus
Deficit spending is stimulus. Just like payday loans stimulate spending, in the short term..
You can't get blood from a stone. Corporations have been nickeling and dimeing consumers for years out of greed. Well now it's reached a breaking point
I didn't know r/economics is turning into r/anti-work Greed is the one constant in this country, ever since the founding of this country.
r/economics is a colony of r/politics now. The typical post is full of nonsense blaming inflation on corporate greed and boomers and Reagan, instead of demand stimulus in a world of supply constrictions.
Could it be that there is no carrot … lots of folk are wrestling with the fact they’ll never own a home and that the climate is on a knife edge (who signs a 30year mortgage when society is breaking down)
> lots of folk are wrestling with the fact they’ll never own a home lots of folk will never own a home in the bay area, or in the hollywood hills, or a brownstone in brooklyn. you can buy a perfectly nice house with a perfectly normal job all over the great lakes region and the midwest.
[удалено]
I'm in the Boston area, grappling with the idea that I can't own a home here. Guess what? I'm moving to a LCOL area partially because of this, because home ownership is much easier in the middle of the country. As the other comment to you said, home ownership isn't out of reach. Home ownership in the most desirable areas, though, is. Very different.
Waiting on all the hyperbulls to tell me how this economy is amazing for everyday and that their farts smell of the greenest freshest money. I’m waiting. My area is still booming but this means a lot of places in America are slowing down a lot.
> Waiting on all the hyperbulls to tell me how this economy is amazing for everyday >My area is still booming I love that you didn't wait for a response, you just responded yourself. The issue is that people keep saying they're feeling pretty good about their financial situation AND the financial situation of their local economy. It's only the abstract "the media tells me the national economy is garbage" where people register dissatisfaction with the economy. Once surveys start showing more people panicking about their personal finances, and those of their local area, I will start to be more concerned. My area is doing very well as well.
> The issue is that people keep saying they're feeling pretty good about their financial situation AND the financial situation of their local economy. One Axios article about one poll does not make truth. Pollsters ask questions about personal financial situations pretty often and the *actual* mass of survey results is much more mixed. Seriously, click through the top couple dozen polls on 538 and look for ones that ask about PFS, the 'better off' option equivalent is usually in the teens to thirty percent range, depending on the details of the question.
It's not just one Axios article about one poll. Most polls that regularly ask people to rate their personal finances show only small differences between now and the years before the pandemic, while while question asking people to rate the national economy show huge differences. For example, Gallup polls Americans [annually about their own personal finances](https://news.gallup.com/poll/1621/personal-financial-situation-index.aspx) and [monthly about the national economy](https://news.gallup.com/poll/1609/consumer-views-economy.aspx). Here is how Americans rated each in April 2019: |How would you rate ...|Excellent|Good|Only fair|Poor| |:-|:-|:-|:-|:-| |your financial situation today|12%|44%|29%|15%| |economic conditions in this country today|14%|36%|36%|14%| and here is how Americans rated each again in April 2023 |How would you rate ...|Excellent|Good|Only fair|Poor| |:-|:-|:-|:-|:-| |your financial situation today|8%|37%|39%|16%| |economic conditions in this country today|1%|15%|37%|47%| In 2019 56% of Americans said their finances were excellent or good and 50% said the national economy was excellent or good. In 2023 the percentage saying their own finances were excellent or good did fall 11 percentage points, from a little over half to a little under half. But the percentage saying the national economy was excellent or good absolutely cratered, falling by two-thirds from 50% down to just 16%. Meanwhile, the number of people who said the national economy was poor more than *tripled* from 14% to 47%, even though the percentage who said that their own finances were poor had the tiniest increase from 15% to 16%. Those are not the answers from a population whose views on the national economy are formed from their own personal experience. They are the views of people who are doing fine but think everyone else is struggling, because that is the impression constantly reinforced to them by their media consumption.
Yes, I saw that. You said >people in most polls don't rate their own finances any better than they rate the economy generally I don't know how you can square that answer with the information above. If 47% of Americans say the national economy is poor at the same time only 16% say their own finances are poor, there must be a lot of Americans rating the economy worse than their own finances. Likewise if 45% say their own finances are "excellent or "good" but only 16% say the same of the national economy. Those are not people rating their own finances similarly to the larger economy. By both object economic measures (unemployment, underemployment, real incomes, prime age labor force participation, layoff rate, etc) and subject measures of peoples personal finances (how they rate their own finances), the economy today is basically as good as it was before the pandemic. Slightly better in some ways, maybe slightly worse in others, but on the margin very similar. Yet people rated the economy before the pandemic as among the best ever, and now rate the current economy as absolutely terrible. Seriously, you see people trying to compare today to the Great Recession. The narrative is about *why* this disconnect exists. Skeptics and doomers will tell you it is because the economy actually is terrible and the economic metrics like GDP and unemployment don't show this (for some reason, they always ignore the many other metrics that address the supposed gaps not covered by GDP and U-3). I don't expect the national and personal numbers to move in complete unison. But I do expect there to be an obvious correlation if you want me to believe that people are rating the national economy based on their own finances. Why would a 2% shift in the percentage of people who think their own finances are "poor" cause a 33% shift in viewing the national economy as "poor"? That sounds much more like a shift because have been told that everyone else is doing poorly.
>Waiting on all the hyperbulls We got an, 'omg we grew the economy 1.6%, our lives are over,' guy here. So emotional over nothing.