High GDP Growth Emboldens Optimists, But Job Data Remains Weak

A strong increase in America’s Gross Domestic Product supports optimistic forecasts for America’s economy, but weak jobs data indicates Americans are facing less job security than ever.

America’s GDP rose 1.4% in the 4th quarter of 2015, according to a new study by the Bureau of Economic Analysis. The third estimate for GDP was an improvement from the last estimate of 1.0% GDP growth, and is a result of stronger consumer spending in the American economy.

A strong increase in America’s Gross Domestic Product supports optimistic forecasts for America’s economy, but weak jobs data indicates Americans are facing less job security than ever.

America’s GDP rose 1.4% in the 4th quarter of 2015, according to a new study by the Bureau of Economic Analysis. The third estimate for GDP was an improvement from the last estimate of 1.0% GDP growth, and is a result of stronger consumer spending in the American economy.

The BEA study noted that GDP growth is becoming increasingly reliant on consumer spending, as personal consumption expenditure—or PCE—is making a significant contribution to the GDP growth, in addition to strong spending on residential housing.

“The increase in real GDP in the fourth quarter reflected positive contributions from PCE, residential fixed investment, and federal government spending that were partly offset by negative contributions from nonresidential fixed investment, exports, private inventory investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased,” said the BEA in a statement.

Whatever weakness there is in the GDP data stems from a downturn in nonresidential fixed investment and government spending at the state and local level. Weak government spending has been a drag on GDP growth as fiscal austerity has crippled budgets in jurisdictions throughout the United States.

With increased reliance on consumer spending, the American economy is becoming dependent on middle class spending. However, weak job data indicates that Americans may find it difficult to stimulate the economy on their own by personal consumption.

Last week jobless claims rose significantly, and many economists believe further increases in jobless claims are likely in the short term.

For now, however, strong consumer spending is driving GDP growth. A study by the Commerce Department showed a 2.4% increase in consumer spending in the last quarter of 2015, driving the GDP gain for America. Some analysts believe cheaper oil could be the cause.

Low gas prices have helped free up income so that Americans can spend more money on goods services, including consumer discretionary goods and services.

While more Americans are struggling to find work, a new report suggests that those Americans who are working are seeing a boost to their income that could boost spending nationwide. A recent BEA report of personal income by state saw that the U.S. growth rate in personal incomes was 4.4% in 2015 from the prior year, with the biggest gains seen in California, Oregon, Florida, and Georgia.

California, which had the biggest gains, saw incomes rise 6.3% in 2015. However, a few Midwestern states and Vermont saw income declines, with North Dakota seeing the biggest decrease in income at 0.2%. That is largely a function of the state’s dependence on oil production.