Any signs of a recession are declining. The U.S. economy is picking up speed in the BEA’s third and final revision of second quarter GDP growth. The U.S. economy has held the 3.0 percent growth rate, mostly due to strong consumer spending, our main growth engine, which was revised down to 2.8% from 2.9%.
Government spending was also an important ingredient, revised up to 3.1% from 2.7% in the second revision, as more Bidenomics investments kicked in. And, the personal consumption expenditures (PCE) price index in the GDP report was 2.5 percent, the same as the previous estimate. Excluding food and energy prices, the PCE price index increased 2.8 percent, also the same as the previous estimate.
The BEA also reported that profits from current production (corporate profits with inventory valuation and capital consumption adjustments) almost doubled in the final revision. So strong economic growth continues without any inflation increase.
The real take from these results is that government investment is driving much of the higher growth where it counts, in future growth, whereas most corporate profits finance corporate stock buybacks that benefit corporate executives, stock and bondholders but not the public sector of roads, bridges, the environment, and healthcare supported by public investment.
The White House said last June just how well Bidenomics policies have been working. “Our economy has added more than 13 million jobs—including nearly 800,000 manufacturing jobs—and we’ve unleashed a manufacturing and clean energy boom. There were more than 10 million applications for new small businesses filed in 2021 and 2022—the strongest two years on record.”
It has given a significant boost to labor productivity, which began to rise in 2023 and boosts wage earners’ standard of living.
Nonfarm business sector labor productivity increased 2.5 percent in the second quarter of 2024, the U.S. Bureau of Labor Statistics reported today, as output increased 3.5 percent and hours worked increased 1.0 percent. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) From the same quarter a year ago, nonfarm business sector labor productivity increased 2.7 percent.
This in turn has stimulated more capex spending—private sector investments that expand production facilities—which is growing at 6% in Q2 2024, seasonally adjusted.
The Economic Strategy Group highlighted the importance of the recent surge in labor productivity: “US labor productivity has enjoyed a period of renewed growth over the past year, interrupting a nearly twenty-year decline: the 2.7 percent productivity growth in 2023 outpaces the 1.5 percent annual average since 2004, and it nearly matches the 2.9 percent pace seen during the country’s last productivity surge in the 1990s.”
The Economic Strategy Group report said a major factor in the productivity surge was the post-pandemic surge in business creation that was also highlighted in the 10 million small business increase touted by the White House report.
There is no question it has taken both public and private sector spending to continue our post-pandemic recovery and reduce worries of an impending recession.
Harlan Green © 2024
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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