The curse of the first quarter strikes again.
The world’s largest economy grew at a piddling 0.5% annualized rate in the first three months of 2016, according to just released numbers from the US Bureau of Labor Statistics. That ain’t great. And it’s probably not really true either.
For the last three years, the first quarter has shown the US economy buckling at the knees, only to have it spring forward to a respectable performance later on.
No one is sure exactly what’s going on. Although some suspect that there are some problems with the government’s seasonal adjustment methodology which serves to understate first-quarter growth, and overstate activity in the second quarter. In other words, when it comes to the actual strength of the world’s largest economy, we’re flying a little blind right now.
But not completely blind, the weekly update on US jobless claims also issued this morning shows that applications for unemployment benefits continue to hang around lows not seen since 1973. For our money this is one of the best high-frequency indicators to gauge the condition of the all-important job market. And it seems to be pretty darn good.
Of course, there’s a difference between the job market and the economy. And even if we discount the weak first quarter number, economic growth isn’t exactly gangbusters right now. (The IMF predicts the US economy will expand by 2.4% this year.) So how do we reconcile relatively weak GDP growth with relatively strong job growth? Well, basically it comes down to the core challenge the US faces if it wants to continue boosting the standards of living: Low productivity.