After witnessing a 2% drop in GDP during the year’s first two quarters, things are looking up as economists expect real gross domestic product will grow at an annual rate of at least 3% in the second half of the year. The two factors most likely to prove economists right? Falling energy (NYSE:XLE) prices and rebounding vehicle production.
Lower gas (NYSE:UGA) prices have the potential to lift purchasing power by about 0.3 to 0.5 percentage points of income in the current quarter. And while Japan’s (NYSE:EWJ) earthquake and tsunami created second-quarter production delays for automakers, cutting 0.5 to 1 percent from GDP growth last quarter, Japanese production lines have gotten back on track more quickly than expected, and America automakers continue to increase production as they strive to take a larger market share.
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However, while GDP growth of 3% is nothing to scoff at, it may not be enough to generate the amount of new jobs needed to bring the unemployment rate down to a more reasonable level or to improve consumer confidence enough to increase spending. In 2010, real GDP grew 2.9% and monthly job growth was roughly 100,000.
Later this week ADP jobs and non-manufacturing reports will give us a better idea of current levels of job growth, but current forecast for nonfarm payrolls is that they grew 108,000 last month, double the 54,000 new jobs added in May, but hardly enough to put a dent in the over 400,000 new jobless claims each week.