Second quarter Gross Domestic Product (GDP), which is the largest measure of economic activity, was just revised upward by the U.S. BEA, from the initial annualized reading of 2.6% to 3.0%. That compares to 1.2% in Quarter 1.
The upward revision leads directly into the highlights of an August 30th interview with Warren Buffet that I happened to come across: www.cnbc.com/2017/08/30/warrenbuffet-this-doesnt-feel-like-a-3-percent-gdp-economy.html.
The legendary investor was asked, “Does this feel like a 3% GDP economy to you?” Buffet didn’t miss a beat, he said “No, it’s been about 2% per year now since the fall of 2009.” While he also pointed out that long-term growth of 2% “is not bad”, he maintained that it just doesn’t feel like a 3% economy to him. In a way, he’s right. One quarter isn’t enough to sway sentiment.
If we look at the data provided by the U.S. BEA, the economy has exceeded a 3% annualized rate just once during the last two and half years. It’s also fallen below 1% twice. Coincidently, the average increase in GDP over the last 10 quarters is exactly 2%. No doubt abut it, at the margin, the improvement is welcome. And recent reports suggest the economy is on a firmer footing, even if GDP growth hasn’t been very robust.
The jobless rate stands at 4.4% (U.S. BLS), which many economists would argue is near or at full employment and job creation has been respectable, if unspectacular (using payroll data from the U.S. BLS). Job openings stand at over 6 million, a record high that dates back to 2001 when this particular survey began (U.S. BLS). Plus, weekly first-time claims for unemployment insurance remain at an unusually low level (Dep. of Labor), which indicates employers are reluctant to lose workers amid improving business conditions and difficulty in finding new ones.
Generally upbeat conditions in the labor market may not spread evenly to every industry, and wages have yet to significantly turn higher, but favorable numbers are underpinning consumer confidence, in my view. Just take a quick peak at the Conference Board’s monthly survey of consumer confidence, which has registered its second highest reading of the expansion and the second highest reading since late 2000.
All in all, the upbeat sentiment suggests the divisive mood in the country played up
in the media isn’t dampening the market…That my friends, is encouraging.