The Labor Department reported the U.S. economy created 126,000 jobs in March. This was a sharp slowdown from the 290,000 average over the prior three months. This relatively weak jobs report led many economic analysts to comment that the economy may not be as strong as they had believed.
This reassessment is welcome, but it really raises the question of why so many professional economists and economic reporters could be so badly mistaken about the strength of the economy. There never was much basis for claiming a boom in the U.S. economy and the people claiming otherwise were relying on a very selective reading of the data.
Just starting with the most basic measure, real GDP in the United States grew at just a 2.2 percent annual rate in the fourth quarter of 2014. This is a pace roughly in line with most estimates of the economy’s potential rate of growth. This means that the economy was just keeping up with the growth in its potential, filling none of the large gap between potential GDP and actual GDP that still persists from the 2008–2009 recession.
Those pushing the boom view were prone to treat the modest fourth quarter growth number as an anomaly, pointing out that the economy had grown at an average rate of 4.8 percent in the prior two quarters. But this reasoning was obviously fallacious. The strong growth for the second and third quarters was just making up for negative growth in the first quarter of 2014.
As a result of a number of factors, most importantly weather and a brief government shutdown, the economy actually shrank at a 2.1 percent annual rate in the first quarter. With more normal weather and no further shutdowns in the rest of the year, the first quarter decline virtually guaranteed strong growth in subsequent quarters. The average growth rate for the first three quarters of 2014 was just 2.5 percent, not very different from the fourth quarter figure.