The Financial Economy Has Galloping Pneumonia, Influenza, *and* the Grippe, But the Real Economy Just Has a Cold Opinion
John Berry of Bloomberg is also puzzled at the disjunction:
Bloomberg.com: Opinion: Sure, the U.S. economy has lots of problems, including falling payroll employment, the highest inflation in 17 years, declining home prices and a shaky financial industry. Consumer confidence has dropped into the basement, partly because of the cost of gasoline, which has gotten so high it's killing sport-utility-vehicle sales. Maybe without the tax-rebate checks, consumers wouldn't have been spending on other stuff. Nevertheless they have. The dollar is in the tank, too, adding to inflation, even for goods coming from China.
And for all that, the U.S. economy expanded in the second quarter, and not at too shabby a rate considering the many drags... about a 2.5 percent annual rate in the second quarter.... "The second quarter appears to be actually better than expected," Federal Reserve Chairman Ben S. Bernanke said at a congressional hearing on July 15. "We're looking at the remainder of the year as being probably positive growth but certainly not robust growth."...
At a July 16 hearing, Massachusetts Democratic Representative Barney Frank... said "if the numbers on employment in the second half are no better than those for the first half, we are on track to lose nearly 1 million jobs this year." That's true, though with about 138 million payroll jobs, that would be a loss of three-quarters of 1 percent. Losses in recessions normally are much higher than that.... The unemployment rate... is about a percentage point higher than it was in the first half of 2007, and it is likely to increase unless economic growth becomes stronger than now expected....
Hefty productivity gains are making a difference this time, a contrast with past slowdowns in which productivity normally fell.... Gross domestic product, which had increased at a 4.9 percent rate in the third quarter, all but came to a standstill in the fourth, registering a 0.6 percent gain. The first quarter was a bit better at 1 percent. As demand slowed, businesses quickly cut the number of hours.... In the fourth quarter... [p]roductivity increased at a 1.8 percent pace. The first-quarter numbers... output was up 0.7 percent, hours down 1.8 percent and productivity increased 2.6 percent. Productivity gains in manufacturing... were much stronger than in other industries....
[O]ver the past 12 months manufacturing production fell 0.6 percent.... In the 2001 recession... was caused by a large retrenchment in business investment, there were several months in which factory output fell 0.6 percent or more...
