We already knew that GDP fell in the first quarter. The Department of Commerce had estimated that output fell by 1 percent as manufacturers sold off inventories produced last year rather than producing new goods, and with unusually harsh weather keeping consumers at home, and shutting down construction and forestry sites.
But new data suggests it was worse than we thought. GDP actually fell in the first quarter at a seasonally adjusted annual rate of 2.9 percent. That's the worst decline since the first quarter of 2009, when output fell 5.9 percent.
The big question is whether this is just a temporary bump in the road, or whether it reflects a more serious problem. Some will argue that this slump is a product of the Federal Reserve tapering its quantitative easing programs too early, and that this slump indicates that it is inevitable that the Fed will have to go back to a stronger stimulus program to get the economy growing again. This is a premature view. A single quarter's data can be quirky, and influenced by transient factor like weather and inventories.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Still others argue that the problem is ObamaCare, but although healthcare spending slightly fell, the impacts of that program will become clear in the long term, not over a single quarter.
Those taking a more optimistic view of the data will argue that the improving employment picture, rising service sector activity, and rising stock markets suggest a broader economic strength and continued recovery. That is the view that I am taking until the second quarter's data shows otherwise.
But certainly, this urges caution. The Federal Reserve must begin to consider the possibility that the taper came too early, and be prepared to reverse course at a moment's notice.
-
Home Depots are the new epicenters of ICE raidsIn the Spotlight The chain has not provided many comments on the ongoing raids
-
Why does Trump keep interfering in the NYC mayoral race?Today's Big Question The president has seemingly taken an outsized interest in his hometown elections, but are his efforts to block Zohran Mamdani about political expediency or something deeper?
-
The pros and cons of banning cellphones in classroomsPros and cons The devices could be major distractions
-
Florida erases rainbow crosswalk at Pulse nightclubSpeed Read The colorful crosswalk was outside the former LGBTQ nightclub where 49 people were killed in a 2016 shooting
-
Trump says Smithsonian too focused on slavery's illsSpeed Read The president would prefer the museum to highlight 'success,' 'brightness' and 'the future'
-
Trump to host Kennedy Honors for Kiss, StalloneSpeed Read Actor Sylvester Stallone and the glam-rock band Kiss were among those named as this year's inductees
-
White House seeks to bend Smithsonian to Trump's viewSpeed Read The Smithsonian Institution's 21 museums are under review to ensure their content aligns with the president's interpretation of American history
-
Charlamagne Tha God irks Trump with Epstein talkSpeed Read The radio host said the Jeffrey Epstein scandal could help 'traditional conservatives' take back the Republican Party
-
CBS cancels Colbert's 'Late Show'Speed Read 'The Late Show with Stephen Colbert' is ending next year
-
Shakespeare not an absent spouse, study proposesspeed read A letter fragment suggests that the Shakespeares lived together all along, says scholar Matthew Steggle
-
New Mexico to investigate death of Gene Hackman, wifespeed read The Oscar-winning actor and his wife Betsy Arakawa were found dead in their home with no signs of foul play
