Trends
Real gross domestic product fell an annualized 1 percent in the second quarter of 2009. While this was the fourth consecutive quarter of declining output, the decline was significantly less than the previous quarter’s 6.4 percent drop, and it may be one of a handful of signs that the worst of the recession may be past. Real consumer spending, which accounts for 70 percent of real GDP, was down 1.2 percent annually, and real exports were off 7 percent. Other declines were more marked: real gross private fixed investment declined an annualized 20.5 percent, and real imports fell 15.1 percent. Measures of manufacturing output were mixed, with industrial production falling and the Institute for Supply Management’s purchasing manager’s index rising. Proprietors’ income fell 5.4 percent on an annualized basis during the quarter, and by 8 percent year to year.
Small business owners and the public were more optimistic in the second quarter, despite underlying economic anxiety, according to the National Federation of Independent Business’s (NFIB) optimism index and the University of Michigan’s consumer sentiment survey. While poor sales continued as the top concern for small business owners according to NFIB, more survey respondents indicated that the next three months were a good time to expand (albeit at lower levels than desired).
The unemployment rate rose to 9.5 percent in June 2009, the highest since August 1983, and job losses since December 2007 amounted to 6.5 million nonfarm payroll jobs. Nevertheless, fewer jobs were lost in the second quarter (1.3 million) than in the first (2.1 million). The only sectors experiencing net job gains were education and health services and other services. Nonfarm productivity rose 6.4 percent on an annualized basis, its highest rate since 2003. Unincorporated self-employment held at the same level as in 2007 and 2008, but the number of incorporated self-employed individuals had fallen by about a half million since 2008.
Interest rates remained low, with long-term Treasury notes inching up slightly. The Federal Reserve maintained its target federal funds rate of essentially zero in an effort to combat the credit crunch. SBA guaranteed lending has experienced a 50 percent rise in the weekly loan volume of the 7(a) and 504 programs since March 2009 (compared to the weekly average before). The rise is attributable to increased demand, implementation of the federal stimulus, and efforts to stimulate the secondary lending market. Venture capital deals increased by an additional $500 million from the previous quarter, but the volume was less than half of last year’s level.
Inflationary pressures were modest: consumer prices rose 3.3 percent on an annualized basis (or 2.4 percent omitting energy and food costs), despite a spike in the price of oil, which rose $21.70 a barrel during the quarter.
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