Some good economic news

After a tepid start earlier this year, the U.S. economy surges to strongest growth in two years:

economyThe U.S. economy grew at its strongest pace in two years in the third quarter, according to government data released Friday morning, helping to allay fears that the world’s largest economy might be stalling after a sustained period of weakness.

Between the months of July and September, the nation’s gross domestic product expanded at an annualized rate of 2.9 percent, slower than before the financial crisis, but fast enough to create new jobs and pare down the unemployment rate, economists said. The reading surpassed expectations of economists surveyed by Bloomberg News, who had forecast growth of 2.6 percent.

The data showed the nation’s economy bouncing back following months of stubbornly sluggish economic growth. Growth in GDP — a broad measure of America’s economic activity — has remained below 2.7 percent for the previous seven quarters.

“It’s a sigh of relief after just over barely 1 percent growth in the first half of the year,” said Stuart Hoffman, chief economist at PNC.

Economists cautioned that the recovery shouldn’t be overestimated, as growth in the quarter was driven by several events unlikely to be repeated in the near future.

One of those events was a surge in shipments of American soybeans to South America, which suffered from a bad harvest. That helped lift exports 10 percent in the third quarter, the biggest increase in nearly three years.

Growth was also buoyed as businesses made new purchases to restock their inventories, after struggling to draw down on large stockpiles of goods in previous quarters.

Jared Bernstein quips at the Washington Post, GDP growth climbs to 2.9 percent in Q3: I knew those soybeans had a liberal bias!:

The last gross domestic product report before the election came out this morning, showing that the U.S. economy expanded at an annual rate of 2.9 percent in the last quarter (2016Q3). That’s the fastest growth rate in two years and a nice pickup from the prior quarter’s rate of 1.4 percent.

Significant contributors to growth in the quarter included net exports and the first inventory buildup in over a year. Consumer spending grew at a moderate 2.1 percent, while prices remained subdued, with consumer prices up 1.4 percent and core prices — the Federal Reserve’s key gauge — up 1.7 percent, another low-side miss for the Fed of their 2 percent inflation target.

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But this being D.C. a few weeks before a presidential election, let’s put aside such analytic points and ask how this number plugs into the debate.

Political scientists argue, with some evidence, that it’s too late for economic numbers to move the needle, and I suspect they’re right. To the extent that someone’s undecided or wavering at this late date, after everything we’ve been through, I can’t imagine why a number — even a nice one like this — will move them.

But trust me, you’ll still hear this 2.9 percent thrown about with great abandon, as D’s argue a GDP resurgence and R’s argue a conspiracy of soybean exporters, who are of course known to have a deeply liberal bias.

The truth is that the resilient U.S. economy remains in growth mode, though growth has downshifted because of the factors noted above. Slower labor force growth is largely, though not wholly, because of our aging demographics, and productivity growth — well that’s just a tough one that economists do not adequately understand. Employment growth remains strong — the over half-a-million jobs created in the third quarter helped boost consumer spending — and wages have been picking up though not in such a way as to drive up prices much.

What you should unequivocally and thoroughly dismiss is any notion that the U.S. economy is an irreparable basket case. No question, we need to try to boost labor supply and productivity, and no question that the growth which has occurred has yet to reach enough households, an important reminder that in the age of inequality, growth is necessary but not sufficient to raise the living standards of the poor and middle class. For that to happen, we need to get to and stay at full employment, meaning the Fed has be especially careful not to overreact.

But sufficiency aside, growth sure is necessary, and it’s good to see that it remains ongoing.

In other good economic news, Matthew Iglesias reports, Americans’ wages just hit an all-time high:

The inflation adjusted weekly income of the typical full-time American worker hit an all-time high in the third quarter of 2016, according to data released yesterday by the Bureau of Labor Statistics.

Fredgraph (10)

Median weekly earnings had been approximately stagnant for the first 15 years of the 21st century. (They spiked temporarily during the Great Recession because low-wage workers were disproportionately likely to be laid off.) But earnings have rebounded sharply over the past 18 months. That’s a mix of an improving labor market giving workers some bargaining power and cheap energy prices keeping inflation low.

This is a slightly different finding from the Census Bureau’s report in September that median household income surged in 2015. The Census looks at all households, whether they’re working or unemployed or retired, while the BLS looks only at individuals who have a job. But the two reports point in the same direction — the economy is getting stronger for ordinary people.

Thanks, Obama!

4 responses to “Some good economic news

  1. Frances Perkins

    John is very selective with his statistics. I guess the deregulated banking industry had absolutely nothing to do with the Bush Recession. But the Republican never ending mantra is that deregulating everything and cutting all taxes will always generate economic growth. I challenge John to name one corporation who has ever paid the rack tax rate. I guess Brownback is proving that in Kansas to an extreme. And somehow junior Brownback, Ducey, believes it too. That by deregulating yoga instructors and athletic trainers the economy will boom. It’s all ideological nonsense, based on I believe , therefore it’s true.

    • John Huppenthal

      No, its empirical evidence at its best. Kansas is not and has never been a low tax state, even after their recent tax cut. Empirical evidence is to look at those states that have been consistently low tax states and compare them to consistently high tax states. When you do that, the evidence is remarkable. The states consistently in the low tax category (bottom ten of tax burden per capita according to Tax Foundation) have doubled the job and economic growth of high tax states (states in the top ten of taxation).

      Arizona is not a bottom ten tax state. Our cities are much too expensive and they are also living proof that you don’t get what you pay for when it comes to government. Just look at our two largest cities.

      When you compare nations around the world to the United States, we have scorched them in economic growth since the huge tax cuts of Reagan.

      France has had negative work growth while the United States has grown the equivalent of 53 million full time jobs. All the countries of the European Union suffer by comparison. They had a Gross Domestic Product 30% higher than the United States in 1980, now it is 20% lower.

      We are suffering now because although Reagan reduced the top tax rate from 70% to 28%, it is now back up to 44% and it is choking off job growth.

      And, its not just taxes, the Code of Federal Regulations has grown from 102,000 pages in 1980 to 172,000 pages now. That’s empirical evidence, the rate of startup companies dropping by 36%, that’s empirical evidence. Now, you may protest that there is no evidence that regulation impedes the startup of a company but try to start one up. I was helping a company this summer and I called the IRS to get assistance on registration. The automated phone system told me that they were too busy, to try back again the next day, yes the next day, not in an hour, the next day. They didn’t even give me the option of being on hold for an hour while I continued to work.

      I worked with one state agency, the Registrar of Contractors who used performance legislation which I put through in 1992, and they never took more 2 minutes to answer the phone in a decade and a half with an average of 7 seconds and they had an 81% excellence rating by those people who called in for help. It never takes more money, the Registrar of Contractors didn’t have two pennies to rub together, it just takes culture of service.

      And, you are exactly correct, the Corporate tax rate is 39% but the average corporation is paying 12% of the income in taxes. But, they are not investing in jobs that would require them to pay the 39%. They are only investing in all the screwball projects favored up by liberal legislators. Reducing the tax rate to 20% would increase tax payments, not reduce them. Ireland, with a 12% corporate tax rate, has doubled our economic growth since 1980.

      But, that would reduce income for all the tax lawyers of the world. We wouldn’t want that, would we?

  2. John Huppenthal

    Obama, Clinton and Bush didn’t completely destroy the Reagan revolution. The top tax rate of 44% is still far below 70%.

    But, we will never have another 8% growth quarter like we had with Reagan.

    With 172,000 pages in the code of federal regulations, up from 102,000 in 1980 the small business formation rate is less than half of 1980. The people who employ poor people are choked to death by both paperwork.

    Welfare is so comfortable, why work at some menial job? With benefits at an all time high level, the employment to population ratio is lower than it was in 1980.

    Why bring jobs to the United States? Our corporate income tax rate of 39% is higher than any OECD country. Ireland at 12% grew their country atdouble our rate since 1980.

    Bob Lucas and his Nobel prize for rational expectations is still alive and kicking. As the presidential transition year of 2008 progressed the economy stalled and collapsed. As this one has progressed, the stock market has stayed strong.

    There are some bright spots, the people who hire rich people have figured out how to live without paying taxes. Warren Buffet, the google boys and bezos know that as long as you pay heavy tribute to the overlords of the democrat party you can make tens of billions without ever paying taxes. That paying taxes thing is relegated to the enslaved small businessman who hates democrats for good reason.

  3. For Sure Not Tom

    How is this even possible? The GOTeaP has been whining for years that Obama is out to take our Freedums’ and Destroy ‘Merica!

    But things are getting better? Obama can’t even destroy America right!