Fri May 31, 2013
Latest Economic Forecast: A Whole Lot Of 'Meh'
Originally published on Fri May 31, 2013 8:23 pm
MELISSA BLOCK, HOST:
We knew it couldn't last. We've been reporting some good news about the economy lately. The housing market has been doing quite well. Unemployment is high, but it's been falling. But today, the government released some key economic data and it suggests things are not quite as good as they seemed. Adam Davidson with NPR's Planet Money team joins us to explain. And, Adam, what did we learn today?
ADAM DAVIDSON, BYLINE: Well, today was really the day of meh. It was not horrible news. This was not an awful day, but it was just nothing. It wasn't great news either. The Bureau of Economic Analysis released the latest data on the personal finances of us Americans and how much money we make, how much we save, how much we spend, and it showed that in April, we basically had no movement at all.
Our income in April compared to March was exactly the same. Our savings was the same. Our spending was almost exactly the same. Same with inflation. Everything was the same.
BLOCK: Well, everything is the same could not necessarily be such a bad thing, right? It's better than the alternative, which would be going down.
DAVIDSON: Although there's another alternative, which is going up, and that's what we really, really need. I mean, yes, I have come on the air far too many times and talked about how this month was much worse than the previous month. And so, yes, it is good that things stayed the same. They're stagnant rather than falling, but what we want to see is unemployment to get much lower than it is.
We want to, you know, have that feeling you have when the economy is growing at a healthy pace and the average person is feeling that growth. And the only way we're going to get there is for all these numbers to go up. We need income to go up. And if income goes up enough, you can get both more spending and more savings at the same time. And that's what we need to see before the economy's healthy enough to really feel recovered.
BLOCK: Well, Adam, what accounts for the stagnation in April and what do economists say it would take for things to get better?
DAVIDSON: Well, what's interesting is this was not, as far as we can tell, caused by the sequester, you know, the sudden drop in government spending because Congress people and the president couldn't agree on a solution to tax and spending reform. In fact, collectively, government workers were one of the groups that saw their incomes go up. Only a little, but it did go up.
Also, people who receive government payments, people on Social Security, Veterans benefits, unemployment benefits, they saw their income go up a tiny bit. And as you mentioned earlier, we have been seeing lots of good data. Just yesterday, we saw that the economy, overall, grew at a reasonable rate in the first three months of the year, 2.4 percent. Not stellar, but pretty good.
Housing is doing better. The stock market is really on a tear, going up and up and up. So what I'm beginning to see is a picture of high-end growth, a high-end economy of wealthy people, of homeowners, particularly people buying higher value homes, doing fairly well, but that not getting out to the average person, the working persons.
So this high-end recovery combined with low-end stagnancy. So for the whole economy to do well, we really need to see everybody sharing in it.
BLOCK: So what's the picture as you look forward, do you think?
DAVIDSON: There really is a battle. There are all these forces moving the economy forward that we've talked about and then there is a lot of expectation that that sequester is going to begin to eat into income as government workers are furloughed and start losing some income and some people's government benefits start falling off. So there's a good chance we're going to be seeing this thing we've had too much of, this two steps forward, one step back kind of dance.
So I think, to sum up today's data, it's better than before, but we are a long, long way from the kind of full recovery that I think we're all looking for.
BLOCK: OK. NPR's Adam Davidson with our Planet Money team. Adam, thanks very much.
DAVIDSON: Thank you, Melissa. Transcript provided by NPR, Copyright NPR.