GDP Numbers: Good News or Bad News?

This is the tale of two headlines. They both concern the latest revised figures for the GDP, but the nuance is in the headlines.

BBC states it as US Growth Rate Revised Downwards

The latest estimate said the economy grew at an annual pace of 2.2%, down from the previous estimate of 2.8%. The first reading had shown growth of 3.5%.

Reuters paints a rosier picture with this headline. Economy Expands 2.2 Percent In Third Quarter

It was still the fastest pace since the third quarter of 2007 and ended four straight quarters of decline in output. The resumption of growth in the July-September period probably ended the most brutal recession since the 1930s.

The good news is that any growth in the GDP is a good thing, but there is far more bad news in the release of these figures then good news, and all indications point to a rough road ahead.

Non residential building construction dropped by 14.8%, imports jumped by 21.3%, business inventories fell by $139.2 billion, business investment fell at a 5.9% rate and continued layoffs.

While those are the figures for the 3rd quarter, the Federal Reserve is predicting that the 4th quarter will continue with a growing GDP, and they may be right, although it has been so long since any of the experts have been right that I am skeptical.

The critical period for me and the time frame I am keeping an eye on is the 1st quarter of 2010, starting in January. There is a lot economic fatigue in the country right now, and a lot of companies have simply grown tired of laying people off and were hoping that there would be something at the end of the year to give them some sort of hope.

Instead all they have received is more bad news of further expansion of federal control over their business sectors, increased regulations, and huge looming mandates for yet more confiscation of their money by the federal government.

Recent EPA proclamations coupled with the steamrolling of the business community and individuals by the Democrats contained in the healthcare bill and a general tightening of the pocketbooks by the average American consumer just doesn't give most businesses anything to be hopeful for.

If the healthcare bill sees the light of day, a lot of construction projects already in the pipeline funded by the states will be cut so that states can meet the Medicaid mandates that will be forced upon them. I am sure a lot of other contracts at the state and local level will have to be canceled to meet these new demands on states budgets.

Of course Nebraska has no problems, just the other 49 states.

There's Always a But

No matter how good the economic news is, the media just can't resist injecting what they think it downbeat news.

So the U.S. economy grew at it highest pace in four years, but Reuters still finds problems.

They so desperately want a recession so they can pound it over the head of the GOP presidential candidate next year.

The U.S. economy grew at its fastest rate in four years during the third quarter, the government confirmed on Thursday, but a surge in new claims for jobless benefits showed the labor market is softening.

The Commerce Department said gross domestic product, which measures total goods and services output within U.S. borders, expanded at a 4.9 percent annual rate in the third quarter, the same as it estimated a month ago and the strongest since the third quarter of 2003.

But growth already is slowing and a separate report from the Labor Department showing an unexpectedly steep jump in weekly jobless claims added a disquieting note of weakness.

Claims rose by 12,000 last week to 346,000 while the four-week moving average of claims -- seen as a more reliable barometer of labor market conditions -- hit its highest in more than two years.

Faster exports and increased inventory-building accounted for the pickup in third-quarter growth from the second quarter's 3.8 percent pace, but many economists say the ongoing drag from a weak housing sector and credit market turmoil will slow fourth-quarter expansion to 1 percent or less.

Of course, when the fourth quarter comes in higher than 1%, we'll be told how experts were shocked. And, of course, another but will be sure to follow.

Still, with the upbeat news, reuters goes out of their way to find someone forecasting catastrophe.

Economist Kurt Karl of Swiss Re in New York said that based upon the economy's current performance, the third-quarter GDP figure seemed "outrageously unrealistic" and said the economy's direction looked increasingly perilous.

"The probability continues to rise for a recession," Karl said, especially in light weakening in the labor market. "It's still hiring, not firing, but now we're getting to the firing point."

We'll check back with Mr. Karl in a few months.

Grim News: Economy Grows at 4.9%

Despite all the gloom and doom in the mainstream media, the economy is still moving forward.

GDP revised up to 4.9% for third quarter

WASHINGTON (MarketWatch) - The U.S. economy expanded at the fastest pace in four years in the third quarter, growing at an real annual rate of 4.9%, the Commerce Department said Thursday in its second estimate of last quarter's growth.

The upward revision to gross domestic product was due to larger inventory building and a better trade balance. It was in line with Wall Street expectations.
A month ago, the government pegged third-quarter GDP at 3.9%. The government publishes three estimates of GDP, adding more complete information with each passing month.

Real GDP has increased 2.8% in the past year, close to the economy's long-run potential.

So let's review.

Unemployment is less than 5% and approaching the "natural rate of unemployment" while GDP has grown this year by 2.8% (anything over 2% is really good). So, while the housing industry is in trouble and there are individual regions that are seeing a significant slowdown, on a macroeconomic level, things are still going pretty well.

Of course, you will only hear this said by the MSM if and when a Democrat gets into the White House.

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