Saturday, May 30, 2015

Contraction in the 1st Quarter of 2015 - US Economy

According to the WSJ (LINK), the US economy contracted (GDP fell at a 0.7% annual rate) during the first quarter of 2015. This is far worse than the initial estimate that showed about 0.2% growth.

Economists are blaming the shortcoming on: harsh weather, a strong dollar and a labor dispute at West Coast ports. These have weakened the demand for American goods at home and abroad.

The Fed views the first-quarter stumble largely due to “transitory factors—such as the stronger dollar—that will dissipate in coming months. The central bank is looking for signs of a rebound soon as it plots when and how quickly to raise short-term interest rates, which have been near zero since December 2008 to stir economic growth.”

Even though we saw a contraction in GDP for the first three months of 2015, “other signs point to the economy humming along at a steady, though modest, growth pace. Company layoffs are exceptionally low and hiring across the U.S. remains solid. Mortgage applications are up amid other signs of growing housing demand.”

“We’re still growing at a relatively steady pace, although one that just doesn’t feel satisfying,” said Richard Moody, chief economist at Regions Financial Corp. “Six years into the recovery, we still really haven’t absorbed all of the idle capacity in the economy. When your underlying trend of growth is so slow, it doesn’t take much to just kind of stop the train.”

Do you have any general thoughts or comments about this article?

Do you think our economy will show growth now that our brutal winter has come to an end?

It seems our economy is doing fairly well (low unemployment level and bump in the housing market) as of late. This prompted the question, is GDP the best measurement of how our economy is working or could there be another evaluating tool more accurate? (Sparked by our in class discussion about Stiglitz last week)


  1. I think many would agree that GDP isn't the most accurate measurements of the over all well-being of an economy, however, I do think it's pretty much the best we have for now. It is important to recognize that it's not always the most accurate indicator and so we shouldn't always take its fluctuations to heart. I do think that production should start picking up again now that we're heading into better weather and more productive (agriculture and infrastructure are back in gear) work is being done. Hopefully this mixed with a rebounding labor and house market will spell a strong bout of recovery.

  2. it's a good sign that the unemployment rate has been low, and housing demand is rising. I agree with Shelby that although the GDP might not be the best measurement but it's the best one available. I do hope that the U.S. economy will be able to show better growth as the weather's getting better (not as of today in Michigan though).

  3. At first glance, one can have the impression that GDP provides a full version of the a the U.S economic activities.Yet a series of elements are not considered in the calculation, so I will have to agree with the above comments that GDP is not the best indicator of the well-being of our economy. Hopefully, the economy will show growth now that the bad weather has ended.

  4. I agree with Shelby that I do not believe that GDP is the most accurate measurement to show how well our economy is doing overall. It is a positive sign to see that unemployment is decreasing and that other economic factors are on the rise. I hope that our economy continues to grow and recover as time passes.