The Great Growth Recession?

According to the BEA's advance estimate, the US economy continued to grow in the April-June quarter, but at a not-very-fast 2.4% annual rate. That's not fast enough to bring the unemployment rate down. Since output growth has been positive for a year now, we can't really say we're in a "recession," but with growth too slow to reduce unemployment, the word "expansion" doesn't really feel right. An informal term for this positive-but-slow growth state is "growth recession." While we shouldn't read too much into one quarter's (preliminary) data, it does raise the question of whether or not the "great recession" will be followed by the "great growth recession."

On a more optimistic note, nonresidential fixed investment growth (i.e., the part of investment that is not houses or inventories) accelerated to a 17% rate. So businesses are adding equipment and software again... if only we could get them to hire workers, too!

Consumption was sluggish - growing at a 1.6% rate as households continued to increase savings.

Net exports made a big negative contribution to the overall total - export growth of 10.3% was swamped by imports rising at a 28.8% rate. After decreasing sharply during the recession, the US trade deficit is headed back up:It remains to be seen how much of a "rebalancing" effect we'll ultimately get out of this slump. This suggests that the US hasn't entirely relinquished the "demander of last resort" role in the global economy, especially with Europe hobbling (ahem, Germany). The flight-to-safety spike in the dollar in 2008 did not help (in general, the effect of exchange rate movements on trade tends to occur with a significant lag).

The BEA release also included revisions of past data which were downward for 2007, 2008 and 2009 (Calculated Risk has a useful picture). In that light, the horrific job numbers make more sense. First quarter 2010 growth was revised upward from 2.7% to 3.7%.

See also Catherine Rampell's Times story and reaction to the report from: James Hamilton, Free Exchange, Mark Thoma and RTE's Wall Street round up.

Update (8/3): New inventory data give reason to expect a downward revision when the second estimate comes out Aug. 27.