From CBS Marketwatch.
The U.S. economy slowed sharply in the second quarter, growing just 1.5% as consumers slashed spending and businesses grew more cautious about hiring and investing, underscoring that an already wobbly recovery is losing even more steam.
In the U.S., though, new government figures showed that growth in gross domestic product, the broadest measure of goods and services churned out by the economy, slowed sharply from the first quarter’s 2% annual rate and the fourth quarter’s 4.1%.
That downward slope in growth is worrisome to economists. As the economy loses steam, a pullback can become self-reinforcing as businesses and consumers worry about the future.
The slowing economy, along with government data showing the recovery has been weaker than thought, raises the specter that a sudden shock—such as an escalation of Europe’s crisis, or next year’s looming tax increases and spending cuts—could shove the U.S. back into recession.
[…]One of the biggest obstacles to recovery is a dearth of consumer spending, which accounts for two-thirds of demand in the economy.
Spending rose 1.5% in the second quarter, lower than 2.4% in the first, reflecting weaker demand for cars and big-ticket items. A big reason is the stagnant labor market. Employers added fewer jobs in the second quarter than they have since the labor market began recovering in 2010.
“The economy is kind of being strangled,” said Bob Baur, chief global economist at Principal Global Investors. “We underestimated how much uncertainty may have contributed to a lack of desire to expand and hire.” Mr. Baur expects 2% to 2.5% growth in the second half of the year but has “grown more cautious,” he said.
[…]Businesses, meanwhile, appear to have grown more cautious about spending. The new GDP report showed that nonresidential fixed investment expanded 5.3% in the second quarter, less than the 7.5% in the first, though spending on equipment and software was healthy. Joseph Carson, an economist at Alliance Bernstein, said: “Uncertainty surrounding U.S. tax laws has created confusion and concern among companies, which has probably depressed investment spending.”
Remember, the Obama administration thinks that higher government dependency “stimulates” the economy:
House Minority Whip Steny Hoyer (D-Md.) said Tuesday that food stamps and unemployment insurance are the two “most stimulative” things you can do for the economy.
During a pen and pad briefing with reporters on Capitol Hill, Hoyer was asked if any Democrats are “reconsidering the wisdom” of letting the Bush tax cuts expire at year’s end for the top income earners given the still struggling U.S. economy.
“I haven’t talked to any who are of that mind,” said Hoyer. “If you talk to economists, they will tell you there are two things that are the most stimulative that you can do — one’s unemployment insurance, the other’s food stamps, okay?”
Of course, all that spending on unemployment and food stamps costs money, so they just borrowed that money from future generations of Americans – your children. The national debt is nearly $16 trillion, but they just keep borrowing. They don’t know what else to do, because they have no idea how jobs are created in the first place.
Republicans think that the best way to stimulate the economy is to create jobs by encouraging businesses to risk their capital in business ventures. But the Republicans aren’t in charge, so we are following the Democrat playbook. Many companies have responded to the Democrat plan to punish “the rich” by expanding their businesses in other countries that are less hostile to job creators. When you introduce burdensome regulations (EPA, Obamacare, Dodd-Frank, etc.) and high corporate taxes (35% – highest in the world!), that means that businesses can hire fewer people at home, and they are forced to expand elsewhere.