links for 2009-04-29
More Congratulations to Emmanuel Saez

Mostly Bad News: The GDP Release

That crack reporter Insert Byline for CNBC reports on the real GDP decline:

GDP Down 6.1%: The U.S. economy contracted at a surprisingly sharp 6.1 percent rate in the first quarter as exports and business inventories plummeted. The drop in gross domestic product, reported by the Commerce Department on Wednesday, was much steeper than the 4.9 percent annual rate expected by economists and followed a 6.3 percent decline in the fourth quarter. GDP, which measures total goods and services output within U.S. borders, has now dropped for three straight quarters for the first time since 1974-1975.

The data came as the Federal Reserve resumed a regular two-day meeting. The Fed, which has cut interest rates to almost zero and pumped about a trillion dollars into the economy to try and break its downward spiral, is expected to leave policy unchanged at the meeting. "There won't be positive growth until the second half of the year probably, but the fall in the second quarter, if it's negative at all, will be far smaller," said Michael Darda, chief economist at MKM Partners in Greenwich, Conn...

That means that production this spring will be a full 3.5% below what it was in the second quarter of last year, when it ought to be 3.0% above.

The only bright sign is that so much of the decline was a fall in inventories. That means that there will be less pressure on firms to cut back employment further than there would be if they were staring at oceans of unmoving inventories:

The advance report from the Commerce Department showed business inventories plunged by a record $103.7 billion in the first quarter, as firms worked to reduce stocks of unsold goods in their warehouses. That sliced 2.79 percentage points from the overall GDP figure. Excluding inventories, GDP contracted 3.4 percent...