National Economic Outlook - April 2015

Written By:
Ingo Winzer, President

Local Market Monitor

The Gross Domestic Product is no longer a highly reliable measure of what's going on with the national economy. In the fourth quarter of 2014 it was up 2.2 percent - but in the third quarter it was up 5.0 percent and in the first quarter it was down 2.1 percent. So, is the economy doing better or worse? At another level, though, GDP can show us how things are different now than they used to be - which can help us foresee future trends.

Ten years ago, in 2004, some parts of GDP looked very much like they do right now. Personal spending contributed 2.7 percent to GDP - versus 3.0 percent in the fourth quarter of 2014, and net imports then were a minus .59 percent - versus a minus 1.03 percent now. The big differences are in government spending, which contributed .37 percent then - against a minus .35 percent now, and in private investment, which contributed 2.0 percent to GDP then but has averaged only .85 percent over the last three years. Between the two of them, government spending and private investment  consistently contribute almost 2 percent less to GDP then they used to.

The number of jobs in March was up 2.3 percent from last year, while unemployment stayed at 5.5 percent. Jobs were up 5 percent in construction - not yet a big deal but a dawning hope that the sector can be resurrected, 1.6 percent in manufacturing, 2.1 percent in retail, 3.5 percent in business services, 2.7 percent in healthcare, and 4.0 percent at restaurants. As is now the new normal, job growth in government was flat.

The GDP data show that healthcare spending was up sharply in the fourth quarter - combined with the recent growth in healthcare jobs this looks like a consequence of the expansion of healthcare insurance. Whether this is a permanent boost to the economy or just a temporary surge remains to be seen.