Congratulations, America: You Propped Up the Economy by Spending the Money You're Not Making
The gross domestic product jumped 3.5% last quarter—the first increase in more than a year—sparking a stock rally and talk of the end of the Great Recession. No, no one has any jobs yet, but stop complaining!
The GDP numbers released this morning were better than expected, and were driven by a 3.4% increase in consumer spending. What this means is that everyone's expectations will be higher in the future about the strength and pace of the recovery, according to the Wall Street Journal:
"The data is suggesting that the economy does have some strength behind it, and that growth itself is going to be on the higher end of expectations," said Kent Engelke, chief economic strategist at Capitol Securities Management.
We're very happy for the economy and its excellent quarter. How did American human beings do last quarter? Let's have a look:
- Personal income decreased .5%, or $15.5 billion.
- Personal income taxes withheld increased $4.8 billion.
- Total personal spending increased .7%, or $20.4 billion
- Personal savings dropped 33% from the previous quarter.
- The number of new jobless claims last week was virtually unchanged from the previous week.
To recap: Your income decreased by $15.5 billion while your spending increased by $20.4 billion and your taxes increased by $4.8 billion, resulting in a 33% drop in "savings," which means the amount of money you have. And you still don't have a job. This recovery is going to be awesome.
On the upside, the total number of people on unemployment has dropped to 5.8 million, the lowest number in seven months, according to Bloomberg. That's great until you think of all the people who have dropped off the rolls because their benefits ran out.
Bloomberg also reports that Caterpillar has started rehiring some of its laid-off employees, finally fulfilling a promise that Barack Obama made about the stimulus package eight months ago. These things take time.