Did I say put me down for 3 percent? I meant put me down for 1.8 percent.

Looks like the pessimists were right (again), GDP grew at a 1.8% rate in the first quarter. Notable weak spots were residential investment and government spending.

The following graph is from Calculated Risk. Note the contrast between the typical movement in residential investment following recessions and the movement following this recession. Several years ago Ed Leamer wrote a paper called "Housing IS the Business Cycle" and this graph demonstrates his point. Housing investment is a big component of typical recoveries and it has been notably, abysmally absent in this one. I don't think we can expect a strong recovery until housing recovers.



In light of the weakness in the economy it's appalling that Ben Bernanke did not use yesterday's news conference to announce a third round of quantitative easing (or, as I suggested a few days ago, a negative interest rate policy). It's appalling that the President and Congress are arguing about how fast to reduce government spending rather than - what was that word we kept hearing about in the Congressional campaigns last fall? Oh yeah, I remember - JOBS.