Downshift in economy gathers speed

The signs are starting to appear everywhere: the U.S. economy is slowing again.

This morning, the U.S. Commerce Department reported that real gross domestic product (GDP) — or the inflation-adjusted total value of all goods and services the nation produces — grew just 2.2 percent in the first quarter of this year. That’s a substantial slowdown from the 3 percent pace of GDP growth in the fourth quarter of 2011. The latest GDP number also fell short of the 2.5 percent rise economists had largely been expecting.

Economists and analysts generally say GDP growth of at least 3 percent, if not 4 percent, is needed to generate substantial employment gains.

In perhaps the most ominous indicator within today’s GDP report, fixed investments by businesses declined 2.1 percent in the first quarter, after charging ahead 5.2 percent in the fourth quarter of last year. It was the first decline in business spending since the fourth quarter of 2009.

The first-quarter GDP number is not set in stone as the Commerce Department will revise it two more times with more complete data. Remember that in the first quarter of 2011, GDP was first reported to have risen 1.8 percent, before ultimately be revised to down to a paltry 0.4 percent increase.

Today’s disappointing GDP number came just a day after the Commerce Department reported that U.S. durable-goods orders fell 4.2 percent in March. That was the biggest decline in three years and followed February’s gain of 1.9 percent.

Finally, weekly initial jobless claims have been steadily trending up for seven weeks, rising from 353,000 claims on March 15 to yesterday’s (April 26) figure of 388,000.

And of course on April 6, the March nonfarm payrolls report sent shockwaves through the markets when the U.S. Labor Department reported that only 120,000 jobs had been created in March, when economists had been expecting 200,000-plus jobs.

To be sure, not all the economic data of late has been disappointing. Reports on consumer sentiment and pending home sales this week beat expectations.

However, the reports on economic growth and jobs are not inspiring confidence that this economic recovery will stay on track.

Everyone will be watching the April nonfarm payrolls report coming out next Friday May 4. Will it show further signs that the economy is hitting stall speed? Stay tuned.

Adam Rombel is editor-in-chief of The Central New York Business Journal. Contact him at arombel@cnybj.com