However, our readers well know that we are suspicious of all the adjustments made (for seasonality and other factors) when presenting the report. We recently reported on the stability of GDP when one simply compares this year’s output to last year’s with no adjustment. To reiterate:
The red bars show the year/year growth in GDP, which has been much smoother than those erratic numbers we get by seasonally adjusting quarterly data and then annualizing it (anyone else think the seasonal adjustments must be a little fishy?) The blue line is business spending on tech equipment and software, which is really starting to look tired.
According to this measure, the range has only been between 1.3% and 4.5%, or approximately half the range as reported. And for the last two years the measure has hardly budged at all, fluctuating between 3.1 and 3.7 percent.
Since GDP measures output, there is of course another way of gathering the data. Output growth is merely employment growth plus productivity growth. And yesterday the Bureau of Labor Statistics published its revised second-quarter productivity estimate:
The seasonally adjusted annual rates of productivity change in the second quarter were:
1.5 percent in the business sector and
1.6 percent in the non-farm business sector.
The unadjusted change from the year-ago quarter was 2.8 percent for all business and 2.5 percent for non-farm.
Since we recently updated the employment growth as well, we can add the recent 1.3 to 1.4 percent employment growth to get an estimate of 3.9 percent year/year in the second quarter, suggesting further upward revisions are possible when the final estimate is released. Still more or less within the recent range that is beginning to look like a constant.
So what about the slowdown? Well, it is cheating a bit to compare the year/year employment to seasonally adjusted and annualized quarterly productivity data - but we’ll do it anyway. If we take the 1.6% non-farm growth and add the 1.3% latest employment growth figure we get to 2.9% - the first crack below 3% in 13 quarters. If this scenario does pan out, for once we will credit the manipulated data for giving us the early look at the slowdown.
Time will tell.