Unfortunately, Still a Plow Horse

Yes, Friday's report of the Q2 real GDP growth rate was a little faster than average, but, with one exception, it remains the same Plow Horse it's been for the past eight years. The US economy has grown at an annual rate of 2.1% since the economic recovery started in mid-2009. So the second quarter 2.6% rate was a little faster, but not much – average it out with Q1, which was 1.2% and you get 1.9%.

The normal July release of the government's annual revisions to GDP data for the past few years didn't amount to much, either. The overall size of the economy – real GDP – was 0.2% larger in the first quarter than previously estimated. Not much change at all, with real GDP growing a little faster than previously estimated in 2014-2015 and slightly slower in 2016.

The best news in the Q2 report was that all three major parts of business fixed investment - business investment in equipment, intellectual property, and commercial construction - grew in both quarters so far this year. We don't want to read too much into this, but an acceleration in business investment may reflect the tightening of the labor market.

Businesses have been able to meet demand by adding jobs to this point in the recovery. But with unemployment below 4.5% and unfilled, but open, jobs nearing 6 million, expanding capacity may finally require more structures and machines, not just better technology.