July 31, 2014
After a frightening 2.1 percent shrinkage of the U.S. economy in the first quarter of 2014, it now appears that the outlook is brightening up. That's because, according to news from Reuters, gross domestic product grew 4 percent in the second quarter of the year -- a huge improvement over the 3 percent economists predicted. This growth has economists hopeful for the remainder of the year, which is good news when you consider the impact of the first quarter's dismal results.
"Today's report shows greater near-term healing and momentum, reducing the downside risks and leaving us comfortable with our forecast for above 3.0 percent growth through next year," Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York, told Reuters.
As USA Today pointed out, a hefty portion of the recovery can be attributed to consumer spending, which makes up more than two-thirds of the economy. Recent numbers show that consumer spending increased 2.5 percent during the second quarter of the year -- more than double the 1.2 percent rise during the first quarter. Businesses adding to their inventory also contributed to the recovery, noted USA Today. In fact, the U.S. economy saw a 7 percent increase in business equipment investments alone.
Although the good news is nothing to balk at, many say that economic growth alone is not enough. For example, as The New York Times noted, the goal of G.D.P. growth doesn't necessarily translate into benefits for the average worker. President Obama reiterated this idea to a crowd in Kansas City this week in an effort to show that work still needs to be done.
"I'm glad that G.D.P. is growing, and I'm glad that corporate profits are high, and I'm glad that the stock market is booming," said President Obama. "But what I really want to see is a guy working 9 to 5, and then working some overtime. I want that guy making more than the minimum wage."
The President was likely trying to call attention to the fact that slow wage growth continues to be an issue, despite outward appearances of economic gains. A high number of unemployed workers means that businesses haven't needed to raise wages in order to attract new employees, noted The New York Times. That issue, in combination with slow job growth, has lead to a job market with sluggish wages and few options for workers.
That's why it is important to keep things in perspective, the Economic Policy Institute, a nonprofit group focused on low- and middle-income workers, said in a press release.
"We made up some of the ground lost in the first three months of this year, but there's nothing in today's data to indicate that the economy is growing more strongly than it has for the past couple of years," read the release.
Still, some hope remains on the horizon for workers and employers. According to the ADP, private employers added over 218,000 jobs during the month of June. A report from the government this Friday will shed light on the overall number of jobs created last month in both the public and private sectors.
Compiled by Holly Johnson
"Bouncing Back, Economy Grew 4% for Quarter," nytimes.com, July 30, 2014, Dionne Searcey, http://www.nytimes.com/2014/07/31/business/economy/us-economy-grew-4-in-second-quarter.html?_r=0
"Economy heats up in Q2 after harsh winter," usatoday.com, July 30, 2014, Paul Davidson, http://www.usatoday.com/story/money/business/2014/07/30/gross-domestic-product-second-quarter/13336479/
"U.S. economy back on track with strong second-quarter rebound," reuters.com, July 30, 2014, Lucia Mutikani, http://www.reuters.com/article/2014/07/30/us-usa-economy-idUSKBN0FZ09P20140730