On GDP day, jobs still hog the spotlight
Thursday morning at 8:30, the Commerce Department will release its first pass at third-quarter U.S. GDP. The number is expected to show that the nation has at least technically emerged from this Great Recession, which began in December 2007.
In healthy times, the U.S. gross domestic product hums along at about a 4 percent growth rate--5 to 8 percent in boom times. On Thursday, many forecasters expect it to come in at 3.2 percent, after shrinking for several quarters. Others say the rate of growth will be more modest. Earlier this week, Goldman Sachs revised its GDP forecast downward to 2.7 percent.
If the number is much lower than estimates -- say, 1 to 2 percent -- expect the stock market to show real disappointment. Last week, the U.K. reported a slight drop in third-quarter GDP when forecasters were expecting exactly the opposite.
Regardless of the GDP number, for many Americans, it won't feel like the recession is over. The official unemployment rate is 9.8 percent and climbing. Most forecasters, and the White House, expect it to crest somewhere over 10 percent. It likely will hang there for some time -- maybe more than a year -- for a couple of reasons.
First, unemployment has continued to rise after each of the past recessions has ended. We know that. But what makes this one different is the depth and length of this recession. Simply put, it is unclear where the new jobs are going to come from.
Another point on today's GDP number: You probably shouldn't expect it to keep rising over the next few quarters to get back to its normal rate.
Many economists believe this is a one-time bump, a caffeinated Red Bull jolt to the economy provided by the $787 billion stimulus passed in February. That spending was back-loaded on purpose, to string out the stimulus, but it's well under way to being spent now and it can only prop up the economy for so long before it either has to organically take over and grow on its own or falter again. That's what the grim "double-dip" economists are predicting.
In other words: don't be surprised to see fourth-quarter GDP recede from whatever Thursday's number turns out to be.
Two examples: Look how vehicle sales fell off the table after the government-subsidized cash-for-clunkers program ended. Second, just yesterday the Senate reached bi-partisan consensus to extend the $8,000 first-time home buyer credit after it was set to expire at the end of next month. Now, it will go until the end of April. By then, the housing and realty industry hopes, spring home-buying will start to pick up. But that type of turnaround seems unlikely if unemployment stays around 10 percent.
So while Thursday's official big number is GDP, employment data still feels more relevant: Whether GDP has grown by 2.7 percent or 3.2 percent or some other number, there are still 7.6 million people who have lost jobs since this Great Recession began.
-- Frank Ahrens
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October 29, 2009; 7:06 AM ET
Categories: The Ticker | Tags: GDP, unemployment
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