July 31, 2013
Q2 GDP & July ADP Payrolls: Moderate Growth Persists
US GDP increased 1.7% (real seasonally adjusted annual rate) in this year’s second quarter, the Bureau of Economic Analysis reports. The pace of growth beat expectations by a hefty degree (based on the 1.0% growth consensus forecast via economists), although today’s “advance” GDP estimate from BEA is fairly close to The Capital Spectator’s average Q2 nowcast of 2.0%, which was published on Monday. Meanwhile, private nonfarm payrolls grew by a net 200,000 in July, according to today’s ADP Employment Report—a gain that also beat the consensus prediction from dismal scientists. It’s fair to say that today’s numbers offer more evidence that modest growth continues to dominate.
If the latest upbeat news on the US economy comes as a shock to anyone, it’s not for lack of clues. As noted in The Capital Spectator's current monthly update of the US Economic Profile, the broad trend for a broad set of indicators continues to signal growth for the foreseeable future. We can certainly have a spirited debate about the prospects for the rate of growth and what it means for particular slices of the economy. But from a top-down perspective, today’s employment and GDP numbers offer more evidence for embracing the view that the economy overall will expand for the near term.
Consider today’s ADP release, which shows that “job growth remains remarkably stable,” notes Mark Zandi, chief economist of Moody’s Analytics, in a press release for the July update. “Businesses are adding to payrolls in most industries and across all company sizes.”
ADP also revised the June payrolls estimate up to a net rise of 198,000. The main takeaway is that the last two months are the strongest back-to-back increases so far this year, according to this data series. That’s a strong signal for anticipating that the Labor Department’s July payrolls report (scheduled for release on Friday, August 2) will also deliver relatively encouraging news.
Meanwhile, today’s GDP report, while far from impressive, is strong enough to promote the idea that the economy will continue to post moderate rates of growth for the near term. “The acceleration in real GDP in the second quarter primarily reflected upturns in nonresidential fixed investment and in exports, a smaller decrease in federal government spending, and an upturn in state and local government spending that were partly offset by an acceleration in imports and decelerations in private inventory investment and in PCE,” BEA explains in the accompanying press release.
To state the obvious, once again, business cycle risk remains low. Economic growth is hardly satisfying in terms of creating jobs and business opportunities to a degree that will quickly mend the still-lingering damage from the Great Recession. But today’s numbers tell us what the data has been signaling all along: the economy is expanding. Based on what we know at the moment, we’re likely to see more of the same in the next round of economic reports through August.
Could this modestly encouraging outlook change? Yes, of course, and one day it will. When it does, in an econometrically convincing way, you’ll read about it here. Meantime, the macro data is still trending positive, as it has been for some time, despite what you may have heard elsewhere.
Posted by jp at July 31, 2013 9:14 AM