Pathetic GDP Report Signals Death Knell for Hopenchange-Onomics

At LAT (via Memeorandum):

The widening consensus that the U.S. economy has slowed to a crawl will be hammered home Friday with the government's expected announcement that the nation's second-quarter growth was far more anemic than previously estimated.

Many economists believe the Commerce Department will revise its estimate of growth in gross domestic product to 1.3% or lower, down from 2.4% — a dismal performance, especially as the country struggles to rebound from recession.

A bad GDP number would cap a week's worth of troubling developments in the housing and financial markets, and ratchet up the pressure on President Obama and congressional Democrats heading into November's midterm elections.

But just as there is widespread agreement that the economy is faltering, there is also a sense that the federal government is running out of options to rebuild momentum.

"Housing is in the tank. Confidence is going down. The stock market is going down. It's hard to imagine how consumers will spend," said Sung Won Sohn, an economics professor at Cal State Channel Islands and former chief economist for Wells Fargo.

He put the probability that economic growth will slide back into negative territory — a double-dip recession — at "40% and going up."

On Thursday, the Dow Jones industrial average closed below the 10,000 benchmark on the heels of worrisome new economic reports.

The government said that while initial unemployment claims last week dipped to to 473,000, from 504,000 the week before, the four-week average still reached its highest point since November. Unemployment was at 9.5% nationally in July and higher in many states, including 14.3% in Nevada, 13.1% in Michigan and 12.3% in California.

And a mortgage trade group said that, while foreclosures overall continued to ebb, more homeowners fell behind on their payments — the second straight quarter in which that has happened. With unemployment still stubbornly high, the data suggest that foreclosures could soon ramp up again.

Those reports followed news earlier in the week that home sales had fallen to their lowest level in more than a decade, despite mortgage interest rates that are at their lowest levels in nearly 40 years.

"All the indicators at the moment are pointing in the wrong direction," said Bart van Ark, chief economist for the Conference Board, a business research group.

See also Fed Chairman Ben Bernanke's speech from Jackson Hole, Wyoming, "The Economic Outlook and Monetary Policy."