The prospect of Donald Trump getting the Republican presidential nomination is dominating media attention these days, with some cause, but this has meant that evidence of a weakening economy has been largely ignored. We have seen a series of reports in the last month suggesting that the economy is likely to perform considerably worse than the 2.5 percent growth rate predicted by most economists at the start of the year. (The Congressional Budget Office's projection was 2.7 percent.)
The most recent bad news was February's data on personal income and consumption. It showed real growth in spending for the month of 0.2 percent. While that is not too bad, January's figure was revised down from 0.4 percent to zero. Given that consumption is 70 percent of GDP, this is not good news on the growth front.
Other evidence of weakness comes from trade, where it seems that the deficit is continuing to expand in the first quarter due to a high dollar and weak growth elsewhere. Non-defense capital goods shipments, which is the largest category in investment, is running behind 2015 levels. Residential construction is holding up, but showing little, if any, increase over the second half of 2015. My bet is that we will see a serious downturn in the non-residential sector as some serious overbuilding of office space in many cities dampens irrational exuberance. Government spending may provide a modest boost in the quarter and year, but austerity fever still dominates politics at all levels.
In short, we could be looking at growth that is close to 1.0 percent for the year. The Atlanta Fed's GDPNow puts first quarter growth at just 0.6 percent. It is hard to see how such slow growth can be consistent with rapid job growth and a continuing drop in the unemployment rate, although I have been surprised in this area before. (Basically, it would mean that productivity growth is falling to zero or turning negative.)
Anyhow, the spate of weak economic reports deserve more attention than they have gotten. It could be bad news for lots of people.
By the way, I actually don't think a recession is likely, just exceptionally slow growth. The use of the R word was click bait to get you away from the Trump stories.