May 1

GDP FLAT-LINES IN THE FIRST QUARTER

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Yesterday, 2014 First Quarter US GDP came in at 0.1%. Nurse! NURSE!!

No matter how you look at it, that was horrible and shows the “recovery” is so weak it cannot take a few months of cold weather in less than half the country.

The FED announcement was also yesterday. They continued the taper and said the economy is getting past the cold weather. The April jobs data comes out tomorrow and will provide better insight to the direction of economy because it is more recent than the GDP data.

The Taper is far less of a factor now than most people realize because mortgage originations have slowed to the lowest levels in nearly 20 years. Even with the Taper, the FED is still buying more mortgage backed securities than are being issued each month. That will also make it a bit more interesting when new MBS actually exceed the FED buying. At what price will buyers other than the FED buy them?

I still think Obamacare is the big story on the economy. I don’t see how it cannot slow the recovery and be a bigger drag with each passing month as more people are forced into the new insurance programs. Jay Carney said yesterday that it actually spurred the economy in Q1!

Changing rules are confusing consumers and employers and hindering budgeting and hiring. Higher premiums and deductibles will slow consumer spending and business investment. We have no official data on who is signing up and how many people actually paid for the new insurance. We just know that people are signing up and insurance companies keep raising premiums to cover the new policies.

I don’t know how much of a drag it will be or if it will be enough to cause another GDP flat-line, but it will have a negative impact to growth and hiring.