1. The BEA reported on Friday that the overall economy grew by 2.2% at an annual rate in the first quarter of 2012. However, the private components of GDP (consumption, gross domestic investment, and net exports) grew by 3.4% from January-March, following a 4.6% increase in Q4 2011 (see chart above). In contrast, there was a 3.1% decline in “government consumption expenditures and gross investment” in Q1, which created a drag on overall economic growth and brought real GDP growth down to 2.2%. The decrease in government spending was driven by a 12.1% decline in first quarter spending on national defense and ongoing cuts in state and local government spending (-2.2% in Q1).
The average growth rate in private real GDP since 2000 has been 1.76% (see chart). Perhaps last Friday’s GDP report is actually better than what is being reported, considering that the private sector of the U.S. economy grew at twice the average rate over the last 12 years.
2. The chart above shows the phenomenal increases in manufacturing output per worker from 1947-2011 using updated data released last week by the BEA for GDP-by-industry and data from the BLS on manufacturing employment. In 1947, the average factory worker produced about $16,000 of annual output (in 2011 dollars) compared to the typical American factory worker today who was responsible for almost ten times that amount of output—$156,000 in 2011. In other words, the average American factory worker today produces more manufacturing output in an hour than his or her counterpart produced working almost a ten hour day in 1947—and that’s why we’re producing record levels of output with fewer workers.
By continually increasing worker productivity and productive efficiency, the American manufacturing sector has been hugely successful at achieving one of the most important economic outcomes of being able to “produce more with less.” In the process, those efficiency and productivity gains have helped conserve scarce resources, including human resources, more effectively than almost any other industry. It’s hard to overstate how much the efficiency gains achieved by U.S. manufacturing have contributed to the improvements in our standard of living by making manufactured goods more affordable over time. We should spend less time complaining about fewer workers in manufacturing, and more time celebrating the phenomenal gains in manufacturing worker productivity.
3. The chart above shows the monthly percent changes in spot prices for crude oil and onions between January 2000 and March 2012. During that period, onion prices have been about 7 times more volatile than oil prices, based on the differences in: a) mean monthly price changes (7.7% for onions vs. 1.3% for oil), and b) the standard deviation of monthly price changes (59.4% for onions vs. 8.6% for oil).
Why compare onion and oil prices? Because onions are the only commodity that doesn’t have a futures market, thanks to federal legislation in 1958 that banned futures trading on onions. Now that speculators are being blamed for high and volatile oil and gas prices we should consider that the volatility in onion prices with no futures markets makes the prices swings for oil look relatively minor by comparison.
4. The chart above illustrates the fact that despite Obama’s claims that oil and fossil fuels are “energy sources of the past,” they are still very much the primary energy sources for domestic production of energy, and will likely remain so for many generations to come. Despite all of the billions of dollars in
government taxpayer subsidies of renewable energy, they provided only 9.3% of energy consumption in 2011, which was barely more than the 8.9% share in 1983, almost 30 years ago—that’s not a lot of progress for the politically popular renewables. And when it comes to solar and wind, combined they provided only 1.6% of the total energy produced in the U.S. in 2011—an almost insignificant amount. Given the abundance of shale oil and gas in the U.S., it’s highly likely that fossil fuels will continue to fuel our economy and continue to be our dependable, affordable “fuels of the future.”