The White House is pumping sunshine—the economy is in tough shape.
Second quarter GDP numbers show the economy is not growing fast enoughto create jobs and bring down unemployment.
Of the 2.4 percent growth reported, 1.1 percent was an increase in inventories—essentially businesses rebuilding and adjusting inventories from recession lows and to accommodate more price-conscious consumers.
This indicates actual demand in the economy is growing a scant 1.3 percent a year. Businesses can accommodate up to 2 percentage points through higher productivity and without adding workers.
Unless spending picks up (and indicators are that is not happening), once businesses stop piling up unsold goods, layoffs will outnumber hires, unemployment will rise with a vengeance, and the economy will head into a second dip. That will not likely happen until after the election. It will show up in fourth quarter data.
Consumers and business have been spending but too much is going into imports—the trade deficit subtracted 2.8 percent from growth. Put another way, had exports and imports grown by the same amount, economic growth would have been in the range of 5.2 percent.
Almost the entire trade deficit is oil and China but the president is not doing enough about either.