It's The Moment Of Truth For The US Economy

2014 was supposed to be the year the US economy "broke out" and achieved growth at a higher rate than we've seen since the crisis ended.

Instead, it's been the opposite. It looks like Q1 GDP, after all the revisions are in, will be decidedly negative. Goldman is currently tracking Q1 GDP at -0.7%!

Of course, the weather was a well-known factor during the first few months of the year, and other data hasn't been quite as bad. So the negative GDP print doesn't actually tell the story.

Nonetheless, at some point there will be no more excused.

In a note to clients, Goldman's top economist Jan Hatzius says it's not showtime for the US economy. This paragraph really captures everything that's going on nicely. In addition to the cyclical short-term factors, the question of whether the US is incapable of above-trend growth is something that's increasingly in vogue among mainstream economists. The bolded lines our ours:

The first-quarter disappointment has resonated among economists and market participants for two reasons. First, it brings to mind the 2011 precedent, and more broadly the repeated downside surprises on growth in recent years. Second, it comes in the wake of the debate around "secular stagnation" that was kicked off by the speech by Lawrence Summers at the November 2013 IMF research conference. If the US economy cannot accelerate to a clearly above-trend pace even after the end of the private and public sector retrenchment at a time when monetary policy and financial conditions still look very supportive, then it is certainly appropriate to ask whether the forces holding the economy back are deeper and more structural in nature. In that sense, it is really "showtime for the recovery", the title of our 2014 outlook article published last November.

All the pieces are in place for the US. The fiscal drag is fading. Household balance sheets have been vastly repaired. State and local bloodletting is coming to an end. If not now, when?