At first glance, the government's revision of economic growth during the first three months of the year might be a bit of a shocker. What? The gross domestic product dropped at a full 1 percent annual rate? Yes, true -- but also subject to future revision.
The extent of the decline was larger than economists expected, compared with the month-earlier reported growth rate (if you can call it that) of 0.1 percent.
If all the numerical stars were lining up and telling us a story of a sustainable decline in the economy, this would be enough to send people into another funk, like the one we saw leading up to the financial crisis. But those stars aren't lining up. Indeed, even after release of the new GDP report, the stock market continued to rally -- at least for the moment.
Don't blame consumers
In his quick read on the report, PNC chief economist Stuart Hoffman notes that consumers remained engaged, even in the face of the brutal winter.
"Consumer spending rose at a solid 3.1 percent annual rate (revised up slightly), but was completely offset by declines in business equipment investment, net exports, construction spending and a large inventory contraction," he says.
Inventories, or the supplies held by business on their shelves and back lots, have been bouncing around quite a bit in recent quarters as firms try to anticipate the level of demand. Obviously, with the volatility, they could do a better job with that task.
Job market healing
Even as the Commerce Department released the gross domestic product revision, the Labor Department was updating new claims for unemployment benefits. As a quick read on the job market at the moment, the jobless claims numbers are essentially telling us, "Move along, there's nothing to see here" (in the GDP report).
New sign-ups for unemployment benefits fell to 300,000. That's the lowest level in nearly seven years, indicating fewer people applied for jobless aid.
We've known for some time that layoffs haven't been the key issue for the job market. Rather, it has been the reticence on the part of business to hire aggressively. We'll get the monthly unemployment data next week.
As for the current quarter, some economists think growth could be running above 4 percent. PNC's Hoffman says the first quarter setback "mostly due to the polar vortex, coiled the 'economic spring' even tighter for a sharp snap-back this quarter."
Once last winter is further behind, Hoffman says growth should run closer to 3 percent during the second half of the year.
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