US economic growth myth slammed by Richmond Fed president Jeffrey Lacker, GDP growth continues at 2 percent, Consumer spending moderate trend, Businesses reticent to hire and invest

US economic growth myth slammed by Richmond Fed president Jeffrey Lacker, GDP growth continues at 2 percent, Consumer spending moderate trend, Businesses reticent to hire and invest

“11.4%: What the U.S. unemployment rate would be if labor force participation were back to January 2008 levels.” …James Pethokoukis, American Enterprise Institute, June 2013

“Nearly half of U.S. companies are reluctant to hire full-time employees because of the ACA. One in five firms indicates they are likely to hire fewer employees, and another one in 10 may lay off current employees in response to the law.

Other firms will shift toward part-time workers. More than 40 percent of CFOs say their companies will consider switching some jobs to less than 30 hours per week or targeting part-time workers for future employment.”…Duke University Fuqua School of Business December 11, 2013

“Freedom is the freedom to say that two plus two make four. If that is granted, all else follows.”…George Orwell, “1984″


From Zero Hedge February 4, 2014.

“Fed’s Lacker Slams Permabulls, Pours Cold Water On The US “Growth Story””

“Unlike the other Fed presidents who are all too happy to lie in order to instill some confidence in a centrally-planned economy and market, not realizing that by doing so they hurt their own credibility, non-voting member Jeffrey Lacker and president of the Richmond Fed has a different approach – telling the truth. Which is why we read his just released speech this morning with interest since once again, it contains far more truth and honesty than anything else the FOMC releases. Sure enough, it has enough fire and brimstone to put even fringe bloggers to shame.

First, just as we have been warning for the past two quarters, all US growth was on the back of inventory – a trend which everyone now realizes is unsustainable. So does Lacker:

Economists’ hopes have been bolstered of late by a recent string of data releases indicating that 2013 ended on a positive note. Second-half growth in real GDP — our broadest measure of overall economic activity — was stronger than we’ve seen in quite some time. While that figure was boosted significantly by inventory accumulation that is unlikely to persist, there was some evidence of momentum that might carry forward.

That evidence, however, is on the back of a consumer who may or may not be back and spending freely once more. To Lacker, it is “may not”:

… It’s no surprise that credit is no longer available on the same terms. And it’s no surprise that consumers have been paying off debt and building up savings in order to restore some sense of balance to their household finances. These developments appear to have contributed to a persistent cautiousness in household spending. Over the last three years, real consumer spending has increased at an annual rate of 2.1 percent. Although consumption grew rapidly at the end of last year, we have seen similar surges since the last recession, only to see spending return to a more moderate trend. Consumer spending trends are likely to depend on whether the dramatic events of the last few years are only a temporary disturbance to household sentiment or if they instead represent a more persistent shift in attitudes about borrowing and saving. At this point, I am inclined toward the latter view.

Next, Lacker slams the permabulls and their perpetual optimism that an improvement is just around the corner:

Many forecasters are citing the recent surge as support for projections of sustained growth at around 3 percent starting later this year. It’s worth pointing out, however, that this has been true at virtually every point in this expansion. In other words, ever since the recovery began, most forecasters have been expecting the economy to pick up speed in the next couple of quarters with the easing of headwinds that have been temporarily restraining growth. My own forecasts (at least initially) followed this script as well.


Despite these perennial hopes, the actual results have been more modest. Real GDP grew by 2.0 percent in 2011, 2.0 percent in 2012 and 1.8 percent for the first half of 2013. This record of relatively steady but modestly paced expansion, despite forecasts of an imminent increase in growth, helps motivate the more cautious economic outlook that I will share with you today.

Hoping that this is finally the year in which that long overdue CapEx spending will finally take place (and which is being halted by none other than the Fed as we explained nearly two years ago)? Don’t.

Businesses also appear to be quite reticent to hire and invest. A widely followed index of small business optimism fell sharply during the recession and has only partially recovered since then. Interestingly, when small business owners were asked in the latest survey about the single most important problem they face, 20 percent answered “government regulations and red tape.” This observation accords with reports we’ve been hearing from many business contacts for several years now.They’ve seen a substantial increase in the pace of regulatory change and a substantial increase in uncertainty about the shape of new regulationsBoth are said to discourage new hiring and investment commitments.”

Read more:



9 responses to “US economic growth myth slammed by Richmond Fed president Jeffrey Lacker, GDP growth continues at 2 percent, Consumer spending moderate trend, Businesses reticent to hire and invest

  1. CW…… Pertinent but a bit OT
    To add to the LEAD IN is the fact that now it is painfully clear that if anybody tries to OPT OUT of the ACA his fine will be in the THOUSANDS of dollars. Since the fine is managed by IRS he could wake up one morning and discover his house has been sealed by IRS, who have placed a lien against the property if he has not paid the fine against him within the time allocated by IRS. Confiscation will follow.

  2. CW…..
    With the exception of the ACA we have nearly a carbon copy of the financial picture of the 1930s. I personally expect the growth SNAIL to get even SLOWER, because weather could become a factor,if it continues until May before it begins to right itself. Then we can look for some 110 – 120 degree stuff later on which will also filter into the growth picture. In short the outlook is pretty bleak, then when compounded by the shenanigans of our alleged POTUS, will most likely become totally FLAT LINE.

  3. OldSailor,

    I agree. In fact, I believe we are currently riding 2 economic bubbles that will in fact pop. It will be devastating.

  4. William……
    In medieval England the shire tax collector was also the sheriff. The sheriff of Nottingham was the nastiest of all of them. If a person did not have the tax money, he confiscated everything of any value that the person had,including the clothing that the person was wearing. The apparent object was to make that person so destitute that he/she would be forced to enter a workhouse, and therein became a slave. It seems to me that unless we the people UNITE and move to interdict the coming feudal, and criminal behavior of our so called leaderswe will languish in the same sort of workhouses.

  5. ……of course most Americansespecially the youngsters think that that will never happen to them,and go right on doing their thing. Unless people wake up from their complacent slumber soon,when they do wake up it will be too late for them to do ANYTHING,and they too will already be wards of the WORKHOUSES.

  6. ……BTW there is NO minimum wage in a workhouse because there is NO WAGE AT ALL. You are essentially in PRISON.

  7. … the WORKHOUSES there are no pizzas,or beer…..only a precisely measured amount of gruel,and stagnant water. Thousands died of resultant scurvy….just as did early English mariners.

  8. Anybody who thinks they have it bad now……does not yet know what BAD really is. Unless people get off their duffs, and take action they will ALL soon discover………”BAD!”

  9. bye bye……..Time for my GRUEL. Have a great day, and Godbless!

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