Friday, February 01, 2013

Couple of Economic Thoughts

So, the economy (GDP) shrank by 0.1 percent in Q4 of 2012. This is a bad sign, but it is completely understandable with the Super Storm Sandy, the threat of major cuts in government spending through the sequester, and the Republican obstructionism that continues.

The private sector grew significantly, but government spending and contractor spending took a nose dive as agencies and private firms that work for the government (particularly in the defense industry) started cutting back significantly to prepare for the automatic cuts that Congress enacted as part of the sequester deal. With government spending shrinking so significantly and the major disruption in business activity in New Jersey/New York, we saw a flat economy.

The markets did not collapse as a result of the surprise contraction in the economy, so it was not completely unexpected.

Today, we saw another 157,000 jobs created with fairly strong private sector growth. Unemployment ticked up to 7.9 percent so that means more people are returning to the job market. Anemic numbers, but coming on the heels of the GDP figure, I would say it was a pretty solid employment report today.

If we are really looking to improve job creation and jump start economic growth, the government needs to increase spending - preferably on construction projects which impact labor, manufacturing operations, and the transportation/logistics industry. We would also get physical assets (i.e., buildings, schools, roads, bridges) that would last for years and pay for themselves over time.

If Republicans would just get out of the way they wouldn't continue to harm the economy by creating economic crisis after crisis.

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