The dismal negative 2.9% first quarter annualized growth rate the Commerce Department reported this morning underscores what University of Chicago economist John Cochrane, in a recent post about a speech by Lawrence Summers, writes:
While the press talks about recovery, macroeconomists look at output growth and employment and it still looks pretty dismal.GDP fell in the recession, but has not recovered relative to trend. What was a recession is turning into everyone's nightmare, perpetually slow growth.
Usually, GDP rises back to "potential" or "trend." This time, the "potential" is falling to meet the lackluster results. Potential decline, Larry points out, already closed 5% of the gap, leaving only 5% left. This is starting to look like lack-of-growth theory, not business cycle dynamics....It's also extraordinary because the Washington policy machine has gotten bored with growth or lack of growth and moved on to squabble about other things.