The Labor Department’s report on first-time jobless claims dipped below 400,000 for the first time since April. It shows that all this excuse-making about the debt limit debate affecting the economy is pretty much hokum. The economy is rising and falling on the fundamentals, and right now we’re in a stagnant period that is trending ever so slightly upwards. The perfect way to destroy that is to mandate near-term spending cuts to hurt economic performance, which of course is the plan on offer in conjunction with the debt limit deal.

But when I say ever so slightly upwards, I mean to put an emphasis on slightly. The leading economic indicators show growth slowing to a crawl.

“We had lost momentum even before the debt limit really became a big issue,” said James F. O’Sullivan, chief economist at MF Global. “It’s never a good time for something like this, but if we were coming off of six months of 250,000 job growth [per month] we would be much more able to withstand this. The economy does look vulnerable now.” […]

Two reports Wednesday confirmed that the economy was decelerating even before the standoff over the federal debt ceiling came to a head in July. The Commerce Department said that orders for durable goods fell a surprising 2.1 percent in June; analysts had forecast a 0.3 percent gain.

A measure that captures business investment outside of the volatile defense and aircraft sectors fell 0.4 percent, while analysts had expected a 1 percent increase. The report prompted one leading firm, Macroeconomic Advisers, to lower its estimate for growth in the April through June quarter a tenth of a percentage point, to a 1.3 percent annual rate.

And the new installment of the Federal Reserve’s “beige book,” its regular compilation of anecdotal reports from businesses around the country, found that the pace of growth has “moderated” in most places, particularly in the eastern United States. The six Fed districts closest to the Atlantic “reported a slowdown in activity,” the document said.

Just one of the 12 Federal Reserve districts showed an uptick in growth. The economy is moving at a low-growth pace that would actually suggest greater government spending to facilitate growth. So of course, we’re going to suck money out.

David Dayen

David Dayen