According to the U.S. Bureau of Economic Analysis (BEA), the U.S. economy finished the first quarter of 2015 at a disappointing 0.2% GDP growth rate, dramatically lower than what most economists had expected to begin the year and a far cry from the disappointing 2.2% GDP growth for the fourth quarter 2014.
Chinese GDP for the first quarter of 2015 came in at 7% growth, down from 7.3% growth for the fourth quarter of 2014 and the lowest pace of growth for a first quarter in six years.
The bright spot globally so far in 2015 is the Eurozone where economic growth for the first quarter came in at 1.4%, a full point above the same period in 2014.
Positive and Negative Signs
The U.S. economy continues to search for focus and a clear direction. U.S. personal income was flat in March 2015 with income growing only slightly in January and February. The final figures for 2014 U.S. trade were released in April with the U.S. realizing a $410 billion trade deficit, $10.3 billion greater than 2013.
However, U.S. personal income was up 3.9% in 2014 according to a recent report from the BEA, substantially above the 2% income growth in 2013. Economic comeback states like Michigan surprisingly outperformed the national average for income growth in 2014. Since the trough of the great recession of March 2009, the Standard & Poors 500 has increased by roughly 200%, the NYSE Composite Index is up 165%, and the Dow Jones Industrial Average has climbed more than 165&. However, the rate of growth for 2015 has been minimal, leaving concern for a stock market correction on the minds of many on Wall Street.
The unemployment rate fell to 5.4% in April and new job growth came in at a respectable 223,000 jobs after poor job creation during the first quarter of 2015. The unemployment rate is the lowest it has been in almost seven years. Historically, 5.1% unemployment means the economy has reached full employment and is close to or at its “optimal” level of functionality. It does not feel as if our current economy is close to optimality, especially with the current labor force participation rate at its lowest level since the 1970s at 62.8%. Our labor force participation rate is more than 10 points below the labor force participation rate of the United Kingdom while our GDP growth rate lags behind our post World War II average annual rate of 3.2%.
Current Issues
GOP presidential hopeful and former Hewlett-Packard CEO Carly Fiorina, recently spoke at the annual Michigan Chamber of Commerce Foundation dinner. Fiorina’s speech focused on leadership and business growth as key elements for an American economic renaissance. On the way home from the event, we had a spirited discussion centered around Fiorina’s talk and the concepts of invention and innovation. We concurred that all too often today many lump the above under the umbrella of innovation, losing the key distinction between invention and innovation and thus the cornerstone or foundation of the American economy since inception. Fiorina focused much of her message on innovation and entrepreneurship while we believe the formula for America success is an economic troika consisting of invention, innovation and entrepreneurship.
Consider the following, invention is the creation of a good, service or process that is new and unique. For all practical purposes, it exists for the first time. Thomas Edison is an example of a great inventor. Innovation happens when someone improves upon or makes significantly better something that has already been invented. Steve Jobs and Bill Gates are examples of great innovators. Lastly, an entrepreneur is a person who owns, organizes, manages, leads and assumes the risks and rewards of a business. The entrepreneur sees opportunities that few others do, and attempts to bring a business to fruition successfully.
Therefore, the economic game-changer is an invention in the hands of an entrepreneur who successfully brings it to market. Once invention occurs, competition and innovation will surely follow. Alexander Graham Bell invented the telephone more than 100 years ago, and look what the iPhone and the Google Android afford us today due largely to the process of innovation.
Dr. Timothy G. Nash is vice president of corporate and strategic alliances at Northwood University in Midland, Mich. He can be reached at [email protected].
