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Government cuts slow economic recovery
Federal government spending dropped 5.6 percent, with military spending down 8.1 percent. Spending by state and local government dropped by 1.2 percent.
Continuing losses of state and local government jobs also continue to drag down monthly employment numbers.
These trends raise questions about the course of federal budget policies that will be argued throughout this presidential-election year.
"The big declines in defense outlays won't continue, but it does highlight the headwinds from what will be a long period of declining government spending," said Mark Zandi, chief economist for forecaster Moody's Analytics.
"This isn't boom times, but it is enough to generate enough jobs to push unemployment slowly lower," Zandi said.
"Having said this, growth in the quarter was less than expected, mostly because of sharp declines in defense spending and weak business investment."
The latter numbers highlighted a divide between businesses, which appear to be thriving, and workers.
Corporate profits rose by nearly 7 percent in 2011, according to Commerce Department figures, while employee compensation rose less than 5 percent.
Despite the surge in corporate profits, business fixed investment fell 2.1 percent, spending on business structures plunged a whopping 12 percent and spending on equipment was up by a weak 1.7 percent, which partly reflects the end of a tax break for business investment last year.
"Businesses are flush right now, but they are very scared. They are hoarding their cash rather than distributing it in hiring, investment or giving it to shareholders," said Scott Hoyt, senior director of consumer economics at Moody's Analytics.
The weak business spending stood in stark contrast to a 2.9 percent increase in personal-consumption expenditures, which account for about 70 percent of the economy.
"Given corporate profits, you might have hoped for more investment growth," said Bill Craighead, an economics professor at Wesleyan University in Middletown, Conn.
"It's acceptable growth in the normal economy, but given how many people are unemployed, it is disappointing."
http://seattletimes.nwsource.com/html/businesstechnology/2018090175_econ28.html
Federal government spending dropped 5.6 percent, with military spending down 8.1 percent. Spending by state and local government dropped by 1.2 percent.
Continuing losses of state and local government jobs also continue to drag down monthly employment numbers.
These trends raise questions about the course of federal budget policies that will be argued throughout this presidential-election year.
"The big declines in defense outlays won't continue, but it does highlight the headwinds from what will be a long period of declining government spending," said Mark Zandi, chief economist for forecaster Moody's Analytics.
"This isn't boom times, but it is enough to generate enough jobs to push unemployment slowly lower," Zandi said.
"Having said this, growth in the quarter was less than expected, mostly because of sharp declines in defense spending and weak business investment."
The latter numbers highlighted a divide between businesses, which appear to be thriving, and workers.
Corporate profits rose by nearly 7 percent in 2011, according to Commerce Department figures, while employee compensation rose less than 5 percent.
Despite the surge in corporate profits, business fixed investment fell 2.1 percent, spending on business structures plunged a whopping 12 percent and spending on equipment was up by a weak 1.7 percent, which partly reflects the end of a tax break for business investment last year.
"Businesses are flush right now, but they are very scared. They are hoarding their cash rather than distributing it in hiring, investment or giving it to shareholders," said Scott Hoyt, senior director of consumer economics at Moody's Analytics.
The weak business spending stood in stark contrast to a 2.9 percent increase in personal-consumption expenditures, which account for about 70 percent of the economy.
"Given corporate profits, you might have hoped for more investment growth," said Bill Craighead, an economics professor at Wesleyan University in Middletown, Conn.
"It's acceptable growth in the normal economy, but given how many people are unemployed, it is disappointing."
http://seattletimes.nwsource.com/html/businesstechnology/2018090175_econ28.html
