As is normal practice, the BEA released the second estimate of 2nd quarter GDP growth. GDP growth was definitely even slower in 2nd quarter than previously reported. CalculatedRiskBlog tells us:
From the BEA: Gross Domestic Product, Second Quarter 2011 (second estimate
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.0 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the “second” estimate released by the Bureau of Economic Analysis.
This was revised down from 1.3% and slightly below the consensus of 1.1%.
Exports subtracted more from GDP – as did changes in private inventories. Consumption of services and fixed investment were revised up slightly.
The following graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The current quarter is in blue.
Click on graph for larger image in graph gallery.
The dashed line is the current growth rate. Growth in Q2 at 1.0% annualized was below trend growth (around 3%) – and very weak for a recovery, especially with all the slack in the system.
Calculated Risk goes on to report on the breakdown of what sectors accounted for what part of the growth (or absence of growth). The two most significant negatives were Personal Consumption of Goods and State/Local Government Spending. Both contracted sharply and each had the effect of lowering the GDP growth rate by 0.34 points. A 1.0% annualized growth rate is really not good at all. It’s horrible in fact. And that means it’s not the time to be cutting state and local government spending. The federal government really could do something but there’s no political will in Washington.
CalculatedRiskBlog tells us about a new major study of American workers and their retirement plans. The study is published by the Transamerica Center for Retirement Studies [note for students: the center is an excellent source of research data and analysis]. CalculatedRisks summarizes:
From Rachel Ensign at the WSJ: For Many Seniors, There May Be No Retirement
Already battered nest eggs took another beating this month with the market’s wild swings. With interest rates essentially at zero since 2008, income from Treasurys and certificates of deposit is pretty paltry. … On top of that, housing prices [leave] homeowners with much less equity to tap.
Here is the survey mentioned in the article: The New Retirement: Working
• The survey found that for many Americans, the foundation of their retirement strategy is simply not to retire, to work considerably longer than the traditionalretirement age, or work in retirement:
–39 percent of workers plan to work past age 70 or do not plan to retire
–54 percent of workers expect to plan to continue working when they retire
–40 percent now expect to work longer and retire at an older age since the recession
• Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.”
• Most workers will continue working out of financial necessity:
–Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30 percent) have currently saved more than $100,000 in all household retirement accounts
–Most workers, regardless of age or household income, agree that they could work until age 65 and still not have enough money saved to meet their retirement needs
–Of those who plan on working past the traditional retirement age of 65, the most commonly cited reasons are of need versus choice
–Many workers (31 percent) anticipate that they will need to provide financial support to family members
When I looked at the report myself, I was struck by this line in the executive summary:
Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.”
This is related to the point I’ve tried to make in the past (and also here and here): Social Security is not a pension plan. Social Security is an insurance program that insures all of us against the possibility of “outliving our savings and investments”. It is particularly disturbing to hear politicians and those least likely to outlive their investments be in such a hurry to cut Social Security (or Medicare) at a time when uncertainty about investments and savings is rising (just look at the uncertain stock market and housing markets)!