Morici: GDP Up Only 0.1%, Bodes Poorly for Jobs Creation
NEW YORK (TheStreet) -- The Commerce Department reported the nation's gross domestic product grew at a disappointing 0.1% annual rate in the first quarter, less than 2.6% and 4.1% recorded the prior two periods.
Overall, it appears 2014 may not be the breakout year President Obama and many Wall Street forecasters predicted, boding poorly for jobs creation.
A colder-than-normal winter slowed consumer spending somewhat, and business investment in new equipment, structures and information technology plunged. But factors other than weather dragged on growth, too.
Sequestration and the longer-term shift in federal spending from activities that support growth, infrastructure, research and development and the like toward social welfare, health care subsidies, food stamps and the like are depressing federal and state spending, investments, and productivity, and ultimately are dragging down aggregate demand and growth.The harsh winter slowed residential sales and construction, and recent builder surveys indicate new home purchases may not rebound as strongly this spring and summer as once expected. Young, first-time home buyers are caught in a vice: lower incomes than their parents had when they entered the labor force along with heavy college debt. Consequently, as many finally leave their parents' homes to set up households, more chose apartments. Construction costs associated with apartment rentals are less than the suburban homes their parents might have purchased and create fewer multiplier effects in the furniture, appliance and home-improvement sectors. Also, apartment activity in existing cities and suburbs likely instigates less complementary commercial development than new suburban subdivisions do. Simply, it's time for the Obama administration to pay the piper for using student loans to prop up demand and keep young adults out of the job market to inflate growth and suppress the unemployment rate over the last five years. Fewer housing starts and more focus on lower cost units don't bode well for growth.
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