National GDP, wage reports show flat economy

Recent GDP numbers and personal income reports provide more proof of an economy that is flat or limping toward recovery.

According to the federal Bureau of Economic Analysis, real GDP — gross domestic product — was up 2% in the third quarter compared to the second quarter. In the second quarter, real GDP was up 1.7%. (The third quarter estimate is subject to a revision planned for Nov. 23.)

The BEA report said the GDP gain was primarily from higher consumer spending, restocking of inventories, investments in non-residential property and government spending.

Consumer spending — the bulk of economic activity in the U.S. — was up 2.6% in the third quarter, and was up 2.2% in the second quarter. Durable goods purchases were up 6.1% in the third quarter and nondurable goods purchases were up 1.9%. Spending on services increased 2.5% in the third quarter.

“The report is weaker than most readings at this point in the postwar cycle but consistent with the early stages of the last recovery (first quarter, 2003) when GDP expanded 1.6 percent,” said Greg Kaza, economic researcher and executive director of the Little Rock-based Arkansas Policy Foundation.

Kaza, who said June 2009 marked the end of the recession a full nine months before the National Bureau of Economic Research made it official, has said this recovery will be remembered as being a jobless recovery in the first several fiscal quarters.

Jeff Collins, A Northwest Arkansas-based economist and economist for The City Wire’s The Compass Report, said the sluggish GDP figures aren’t likely to help improve the labor market. The Fort Smith metro jobless rate is creeping closer to 8%, with a 7.9% rate in August. The Arkansas jobless rate was up to 7.7% in September, and the U.S. jobless rate was 9.6% in September.

“The recovery is clearly underway and with each passing quarter the likelihood of slipping back into recession dims. Yet, no observer of the current economy can be thrilled with the pace of growth or the lack of job creation,” Collins explained. “One bright spot: initial jobless claims were down to the lowest level in three months. The employment data however, indicates current trends are essentially flat.”

BEA figures released Monday (Nov. 1) show that personal income dipped 0.1%, or $16.8 billion in September. Also, disposable personal income fell 0.2%, or $20.3 billion in September.

“The September change in personal income reflects provisions of unemployment compensation legislation, which had boosted emergency government unemployment benefits (within current transfer receipts) in August,” the BEA noted in the report. “Excluding emergency government unemployment insurance benefits, … personal income increased $8.7 billion, or 0.1 percent, in September, following an increase of $33.9 billion, or 0.3 percent, in August.”

Although private wage and salary disbursements were up $3.3 billion in September, the August increase was $23.6 billion. Also, goods-producing industries’ payrolls — still a large component of the Fort Smith metro economy — decreased nationwide by $1.6 billion in September. The August report noted an increase of $6.7 billion in the sector.