Earth to D.C.: Repeal the sequester
Economic forecasters exist to make astrologers look good. Most had forecast growth of at least 3 percent (on an annualized basis) in the first quarter. But we learned this morning (in the Commerce Department’s report) it grew only 2.5 percent.
That’s better than the 2 percent growth last year and the slowdown at the end of the year. But it’s still cause for serious concern.
First, consumers won’t keep up the spending.Their savings rate fell sharply — from 4.7% in the last quarter of 2012 to 2.6% from January through March.
Add in March’s dismal employment report, the lowest percentage of working-age adults in jobs since 1979, and January’s hike in payroll taxes, and consumer spending will almost certainly drop.
Median household incomes continues to decline, adjusted for inflation. Another report out today showed consumer confidence fell in April.
Second, the recovery continues to be wildly lopsided. The only thing really keeping it going is the rip-roaring stock market. But the stock market only boosts the wealth of the richest 10 percent of Americans, who own 90 percent of stocks (including 401-K retirement accounts).