Bill Mitchell — US economy slows down sharply, government undermining growth

Is the real GDP growth rate fast enough in the US? That depends on what the aim is. In relation to the output gap, the answer is no!

In relation to the labour market the answer is no. The current growth rate is below that necessary to reduce unemployment further.

The US government (all levels) is now undermining growth even though the Federal level provided a modicum of support in the March-quarter 2015, reversing its destructive effect in the December-quarter 2014.

But the overall public contribution to growth is negative because the state and local governments have significantly cut back on their spending.

Households are also starting to save more of their disposable income despite falling oil prices and businesses are generally adopting a pessimistic view as evidenced by the contraction in investment support for growth.

Overall, not a rosy picture. But it might have been the weather. We will see when the June-quarter data comes out in July sometime.

Bill Mitchell – billy blog
US economy slows down sharply, government undermining growthBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia