U.S. Fourth Quarter GDP Increased, but Sluggishly
The U.S. economy is currently mimicking the snoring old man who wouldn’t get out of bed in the morning. U.S. Gross Domestic Product (GDP), the standard measure for total economic activity, grew by an annualized 2.9% in the fourth quarter, according to the advance estimate from the Bureau of Economic Analysis (BEA) released Thursday morning.
According to the report, the U.S. economy is a mixed bag right now. It could be described as “fine, but not great,” or perhaps “struggling, but not terrible.” There’s good news, bad news, and just plain ugly news. Consumer spending grew by 2.1% — The Wall Street Journal called this a “solid” pace for “the economy’s main engine” — while private investment grew by 1.4%. That’s the good news, although some consumers financed their holiday spending with staggering levels of debt.
Now for the bad: government spending increases (3.7%) far outpaced both private measures, especially federal spending (6.2%) and particularly nondefense spending (11.2%). This represents the unchecked firehose of debt-funded dollars spewing forth from Capitol Hill. Such top-heavy growth is unsustainable; all federal spending must eventually be repaid by taxpayer-consumers — now with steep interest premiums — which reduces consumer spending and private investment proportionally. This week the U.S. federal government hit an unprecedented debt ceiling of $31.4 trillion.
Finally, the ugly: the housing market continued its swan dive. Residential investment declined in the fourth quarter by an eye-popping 26.7% — after declining 27.1% in the third quarter. The housing market has lost 46.4% of its value since the fourth quarter of 2021.
While it’s good to see U.S. GDP increasing, the fourth quarter numbers represent a sluggish finish to a year that began with two quarters of negative growth — a common definition of recession, although the Biden administration denies there is a recession — and a slight decline from the third quarter’s 3.2% growth rate.
In fact, the GDP for the fourth quarter of 2022 represents an increase of only 1.0% from a year earlier, a number comparable to the annual increases in the fourth quarters of other recession years, including 1990-1991 (0.6% and 1.2% respectively), 1960 (0.9%), and 1981 (1.3%). In each of these recessions, the Federal Reserve raised interest rates in an effort to control inflation. With an increase of only 1.0% from a year earlier, the fourth quarter of 2022 ranks 62nd out of the 75 years since record-keeping began in 1948, lower than any non-recession year.
These numbers suggest that the U.S. did, indeed, experience a short, mild recession in the first two quarters of 2022, but the ensuing recovery has been only tepid. What else would you expect with inflation still pummeling every family in the wallet? To make an omelet in this economy, you’ll have to break a few piggybanks.
The Wall Street Journal characterized the fourth-quarter slowdown as a “return to a more normal pace of growth,” but the Commerce Department data they site suggests otherwise. The average fourth-quarter GDP increase from a year earlier is 3.1% since 1948 and 2.0% since 2000. The shabby, 1% increase in the fourth quarter of 2022 was the fifth-worst of the 21st century, only ahead of the final quarters for 2001, 2008, 2009, and 2020. Granted, when the camera zooms in to focus only on the final quarter, the 2.9% GDP growth rate seems closer to the average. That perspective, however, not only ignores the bleak remainder of 2022, but also the fact that even that mediocre figure is inflated by wild government spending.
There are other concerning economic signs not reflected in these GDP data. Big Tech giants have laid off tens of thousands of workers in preparation for troubling economic times ahead. Alphabet (Google’s parent company), Amazon, Meta (Facebook’s parent company), Microsoft, Salesforce, Tesla, and Twitter have already or will shortly lay off nearly 69,000 employees. Other tech companies large and small are also laying off employees — some by as much as 10%-25% — including Adobe, Carvana, Coinbase, DoorDash, Intel, Lyft, Malwarebytes, Netflix, Oracle, RingCentral, Robinhood, Roku, Stripe, Shopify, Snap, Twilio, Vimeo, WeWork, and Zillow. A review by Crunchbase concludes that tech companies cut 107,000 jobs in 2022 and have already cut more than 46,000 workers in 2023.
Companies have also started to shelve non-moneymaking ventures, such as charity programs, another indication of their preparation for economic hard times ahead. Amazon announced plans to end the AmazonSmile program by February 20. In an October survey, 59% of CEOs said they “plan to pause or reconsider their organization’s ESG efforts in the next six months as they adjust their strategy to prepare for a recession.” If economic conditions remain hunky-dory, corporations missed the memo.
Big Business — especially Big Tech — is lying in the bed it made for itself. From search engines to payment processors, from social media platforms to data storage, many technology corporations have acted against their own business interests by cutting conservatives off from their (often neutral) services, as a new database catalogues. Whether their motive was mere ESG virtue signaling or placing a subtle thumb on the political scales, the effect was the same: undemocratically tilting the political landscape to the left. Some corporations have even waded into politics more directly, sponsoring left-wing politicians, PACs, and GOTV efforts.
Now, they’re getting exactly what they paid for: the Left’s anti-business economic agenda, heavy on the social programs and green subsidies, but light on ways to generate the economic growth to pay for it. By playing footsie with Cancel Cuisine, corporations have served themselves a heaping plateful of mushy feelings drowned in a sauce of economic difficulty. But apparently, plummeting profits and excising employees are prices Big Business is willing to pay for a fistful of political power.
Joshua Arnold is a staff writer at The Washington Stand.