Figures for October, November and December of 2012 show a Fourth Quarter Drop and that the U.S. economy fell a surprising 0.1 percent instead of the 1.0 increase expected. How many trillions have we pumped into helping the economy? The turn down which has been described as a “shock” and “unexpected” by many, was a surprise to all but those who have been watching the declining figures for the previous few months.
The decline would certainly not shock Lakshman Achuthan of ECRI (Economic Cycle Research Institute) who called a recession last year which he maintains began in July of that year. Mr. Achuthan took a lot of heat from stock market and economist talking-heads for his call but would not back down from it. His company ECRI, has correctly called each recession since 1990 with no false alarms in between. While there have been many who correctly called a recession or two, they have also miscalled recessions in 1995, 1998, 2003, 2005 and 2008 and 2010.
The GDP contraction calls into question the ability of the nation to manage future tax increases and spending cuts. Note to Washington: You can only stick the golden tax payer “goose” so many times before it decides it is time to join the stickers.
With the reinstatement of the payroll social security tax in January the loss of income may have a trickle down effect on the spending of John Q. Public. If consumer spending drops off, then the whole cycle of contraction may continue and the economy will hobble down the street like an old man chasing the “debt-ceiling” can.
Unemployment has been a particularly troubling aspect to the economy. A report from ADP National Employment indicated private payrolls gained 192,000 in January after increasing 185,000 in December. This sounds great until you realize the jobs number the economists use to just keep up with the growing population is 150,000 to 200,000. Hmmm, not so great especially in view of the fourth quarter drop.