By: Jeff Cox
Two months from now, revised government estimates are likely to show that the economy is even bigger than the currently stated $15 trillion.
And while the numbers may make some blink or gasp, the mere size of gross domestic product won’t hide the reality that in terms of actual growth, this is also the worst economy in 83 years.
GDP growth is in the midst of its longest sub-3 percent annual growth rate since 1929, the beginning of the Great Depression, according to Bespoke Investment Group. The economy hasn’t topped 3 percent since 2005—before Federal Reserve Chairman Ben Bernanke took over—and is unlikely to do so this year.
So even if projections are correct that the economy is about 3 percent bigger than thought—say, another half-trillion dollars—the U.S. is still stuck in the slow-growth morass it has endured since the beginning of the Great Recession.
Nowhere is that more apparent than in employment.
Though employment has risen by 1.3 million over the past year, unemployment that counts the discouraged and underemployed, as well as the jobless (often called the “real” unemployment rate) has remained stubbornly high, at 13.8 percent of the workforce, according to the most recent count.
In fact, a state-by-state look at the numbers, released a few days ago and current through the first quarter, shows that just six states have real rates below 10 percent.
The best of the lot is North Dakota, at 6.2 percent, while the worst is in beaten-up Nevada, with a real rate of 19.6 percent.
Over the past year, the rate actually rose in six states (Alaska, Delaware, New Hampshire, New Jersey, New York and Pennsylvania) and was unchanged in three (Connecticut, Mississippi and Oregon).
While the government said the GDP revisions will present a more encompassing look at the economy, critics are howling that the changes are an attempt to mask weak growth and rationalize more debt.
“It shouldn’t come as a surprise they are going to change the way this number is reported,” said Michael Pento, founder of Pento Portfolio Strategies.
“When GDP numbers are chronically bad [averaging just 1.45 percent in the last two quarters] and the labor force participation rate is perpetually falling, our government will do the same thing they did for the inflation data—tinker with the formula until you get the desired result,” he said.
Under the new math, the government will add research and development spending, as well as the capital value of all books, movies, records, television programs and plays produced since 1929.
In jacking up the economy’s size, the revisions also will skew the ratio of debt to GDP, considered important in determining government spending.
Of course, the recent attempt at debunking a critical study of the ratio by Carmen Reinhart and Kenneth Rogoff also has dimmed the prospects for government debt-cutting. The two economists asserted that a 90 percent debt-to-GDP ratio restrained growth, but the data set they used has been challenged as faulty.
The new GDP calculations, combined with the souring on the Reinhart-Rogoff conclusions, likely will add to the thirst to keep Washington’s debt machine purring.
Pento points out that no matter what the government does, it can’t mask that revenue collections have been nearly stagnant over the past six years—a metric that as much as anything else outside of employment indicates true growth, or the lack thereof. And that has come as public debt has soared by $7 trillion.
“The fact is that the U.S. economy isn’t growing fast enough to significantly increase the revenue to the government, but our debt is still soaring,” Pento said. “It’s a shame they won’t just implement real measures to grow the economy like reduce regulations, simplify the tax code and balance the budget.”
The Bureau of Labor Statistics reports the April job creation numbers Friday.
As could be expected from the weak recent data, economists are beginning to trim their forecasts to show that the pace of employment growth was anemic.
Rewriting economic history won’t change that.
Follow Jeff on Twitter @JeffCoxCNBC.com.