If July 2009 eventually marks the official end of the Great Recession, as is commonly believed, then the recent data suggest that the spring of 2010 may be remembered as when the recovery began to feel like one. Most notably, the March employment report showed distinct signs of renewal, despite the …
If July 2009 eventually marks the official end of the Great Recession, as is commonly believed, then the recent data suggest that the spring of 2010 may be remembered as when the recovery began to feel like one. Most notably, the March employment report showed distinct signs of renewal, despite the fact that commentators were quick to point out that the 162,000 March increase was inflated by Census hiring and a bounce from the February snowstorms.
Nevertheless, taking out the 48,000 census hires and averaging the February and March figures nets a gain of 50,000 per month. The unemployment rate remained at 9.7 percent as employment gains in the household survey were more than offset by an increase in the labor force, caused in part by individuals resuming suspended job-hunting campaigns.
The final estimate of real GDP growth in the fourth quarter of 2009 came in at 5.6 percent, boosted by a rapid slowdown in the pace of inventory liquidation. Although inventory-related production kicked in 3.8 percentage points of growth in the fourth quarter, rapidly stabilizing inventories mean that the contributions from this source are nearing an end. In contrast, final sales of GDP (which exclude inventories) grew at a modest 1.7 percent pace. Within final sales, exports and business spending on equipment and software posted strong gains. Nonresidential construction spending remained the biggest drag on growth, hampered by high vacancy rates and tight credit conditions in commercial real estate. The monthly indicators are also looking up, with continued strength in manufacturing as measured by the ISM index. Orders for durable goods also continue to trend higher.
All remains quiet on the inflation front—very quiet. The core CPI (which excludes food and energy prices) ticked 0.1 percent higher in February (0.6 percent annualized). Over the past three months, the core rate registered a barely positive 0.1 percent annual rate. This compares to a 6-month annualized change of 0.8 percent and 1.3 percent over the past 12-months—a pattern which evinces rapidly evaporating inflation pressures. The Cleveland Fed’s 16 percent trimmed mean CPI and median CPI estimates—based on a more scientific approach at fathoming core inflation—are telling much the same tale. Year-over-year, headline CPI inflation ran at 2.1 percent in February. [2010-04-05]