How is The U.S. Economy Doing? Examining Latest Data
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LINDA WERTHEIMER, HOST:
And I'm Linda Wertheimer.
It was a good week for the economy, at least according to the data. To talk about what the latest numbers tell us about the health of the economy, we reached Ryan Avent. He writes for The Economist magazine.
Good to have you on our program, Ryan.
RYAN AVENT: It's great to be here.
WERTHEIMER: The report that drew a lot of attention this week was the one that tracks our trade deficit with other countries. It showed that the trade gap dropped more than 20 percent. That sounds huge to me. What is behind this? What does it mean?
AVENT: Well, there's a couple of things about that drop that are encouraging. I think one is just the magnitude of it means that when our statistical agencies go back and look at second quarter GDP, they're going to end up revising it up quite a bit.
WERTHEIMER: So the gross domestic product has been growing faster than the statisticians are telling us?
AVENT: That's right. And then I think the other side of the trade report that's really nice is what it suggests about this sort of qualitative improvement in our economy. It was a very broad-based improvement. We are exporting more across a whole range of categories. We're exporting more to all sorts of different countries. It didn't come from just one set of products or one set of countries, and think that hints at an improvement in the economy that we've been waiting to see, what a lot of people would refer to as rebalancing, to something that's less dependent upon consumption from households that's sort of supported by a lot of borrowing, the kinds of things that really got us into trouble before the crisis.
WERTHEIMER: Now, that was, of course, not the only economic news out this week. There was a pretty rosy manufacturing report. And yesterday, we had jobless claims. Could you just talk about what those other indicators might be telling us?
AVENT: Sure. We had a series of sort of - you might even call them blockbuster reports on manufacturing, and even service sector activity. And I think that what those suggest is a trade deficit isn't fooling us when it says that the recovery is really sort of getting its legs under it, looking less fragile than it may have done a year or two ago. And then the jobless claims report sort of solidifies that. It was second straight week when numbers were quite low. The four-week moving average - which was is a little less volatile - bounces around a bit less than - just a weekly number is also particularly low, and back to pre-crisis levels, just about. And so that suggests that the hiring that we've sort of been seeing over the past few months is likely to be sustained, and that it may actually quicken a bit in the months to come, and that would definitely be an encouraging thing.
WERTHEIMER: Well, tell me this, Ryan Avent: Why does it not feel good yet? So many people are still scared, still concerned, still answering polls, saying that the country appears to be headed in the wrong direction. When are we going to start feeling this?
AVENT: I think one reason it still feels bad is that we're in such a deep hole, and the road out has been so long and slow that we still have a ways to go before we're back to point where the unemployment rate is where we'd like it to be. I think the other thing to keep in mind is that there are some ongoing threats to the economy. Part of that is related to the budget cuts that we've come to call the sequester, and when Congress comes back from its August recess, they're going to be having all sorts of showdowns over spending bills. There will be another debt limit fight that could really throw markets off. And then the Federal Reserve is also a source of uncertainty. They're maybe looking at these positive data and thinking that now is the time to start pulling back on some of the support they've been providing. And if they do that too quickly, it could end up pulling the rug out from under us.
WERTHEIMER: So what is the takeaway from this whole week of interesting and mostly good news?
AVENT: Well, I think that we can be confident that the recovery is a lot less fragile than it was a few years ago. It's less based on government support. It's less based on borrowing or consumption that doesn't look like it's sustainable. The downside is that we still have a long way to go before labor markets are back to where we want them to be. And I think there is some risk that looking at the good data, the good news out of the economy, Washington may sort of feel much less pressure to try to do things to help the jobless, to make investments in the economy that would really improve growth over the long run.
WERTHEIMER: Ryan Avent is with The Economist magazine. He spoke to us from London. Thank you very much.
AVENT: Thank you, Linda.
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