This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Economy Slows in First Quarter; Weaker Jobs Growth Likely

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- The economy grew at a 3% annual rate in the fourth quarter of 2011, but first half growth is likely to disappoint, renewing upward pressures on unemployment.

Fourth quarter growth was powered by stronger consumer spending -- especially on autos, substantial additions to business inventories, and stronger multifamily home construction. In the first quarter, gains in consumer spending continued, but outpaced income growth. However, unlike the boom years of the last decade, households are not able to refinance credit card debt and auto loans by further mortgaging their homes, and consumers simply have to slow down soon.

In addition, nonresidential construction spending has been disappointing. Whereas construction, overall, contributed positively to GDP growth in the fourth quarter of 2011, it will subtract in first quarter of 2012.


The economy will register growth at about 2.2% the first quarter and then slack off in the second quarter to well below 2%. The second half should see growth just above two%, and hardly enough to bring down unemployment. Those trends should continue into 2012.

Household incomes have simply not been growing rapidly enough to sustain the recent surge in consumer spending. Although the consumption component of GDP will be strong the first quarter, too much of that was tapped off to pay for imported oil through higher gas prices, and that will drag on GDP through the trade balance.

10 Stocks That Could Rise in Market Decline

Moreover, the surge in hiring from December through February was not matched by strong improvements in wages, and if gas prices in the range of $4 a gallon continue, those will markedly affect consumer behavior through the spring and into the summer.

Recent data for new hiring and rising unemployment claims indicates the jobs market is cooling again, and that will further dampen household income growth and consumption. New hiring will be barely sufficient to accommodate labor force growth, and certainly well below the 360,000 new jobs needed each month to pull down unemployment to 6% over three years.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.99 0.00%
FB $102.01 0.00%
GOOG $682.40 0.00%
TSLA $151.04 0.00%
YHOO $27.04 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs