Economic slide into the abyss halted, sustained recovery to take longer

Posted by AzBlueMeanie:

Christina Romer, Chairwoman of the President's Council of Economic Advisors, writes On Today's GDP Numbers:

Data released [Thursday] by the Commerce Department show that real GDP grew at an annual rate of 3.5 percent in the third quarter of the year. This is in stark contrast to the decline of 6.4 percent annual rate just two quarters ago. Indeed, the two-quarter swing in the rate of growth of 9.9 percentage points was the largest since 1980. Analysis by both the Council of Economic Advisers and a wide range of private and public-sector forecasters indicates that the American Recovery and Reinvestment Act of 2009 contributed between 3 and 4 percentage points to real GDP growth in the third quarter. This suggests that in the absence of the Recovery Act, real GDP would have risen little, if at all, this past quarter.

After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction. However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered. The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP. And it will take sustained, robust GDP growth to bring the unemployment rate down substantially. Such a decline in unemployment is, of course, what we are all working to achieve.

The New York Times reports Economy Expanded in 3rd Quarter, First Time in a Year:

The nation’s gross domestic product expanded at an annual rate of 3.5 percent in the quarter that ended in September, matching its average growth rate of the last 80 years, according to the Commerce Department.

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Before the third quarter, the gross domestic product — the broadest measure of the government’s total goods and services produced — had been shrinking for a year. It bottomed out with a 6.4 percent rate of decline in the first three months of this year, the steepest fall since 1982.

The trend was halted last quarter primarily because of consumers, who drove most of the economic gains.

The government’s cash-for-clunkers program spurred consumers to spend more on durable goods, orders of which grew at an annual rate of 22.3 percent in the third quarter after a decline in the previous quarter. Similarly, the $8,000 federal tax credit for first-time home buyers helped revive housing sales, which rose at an annual rate of 23.4 percent in the third quarter. Housing sales had actually fallen by a comparable amount in the previous three months.

The $787 billion stimulus package, which was passed last winter and is still being distributed, is also credited with strengthening economic activity, although the precise contribution is contested.

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Still, withering consumer confidence and concerns about a weak recovery have left companies wary of hiring more employees. The jobless rate reached 9.8 percent in September, its highest in 26 years.

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Concerns about rising unemployment may pressure the administration to look for additional ways to stimulate the economy. Proposals include another extension in unemployment benefits and various job creation programs.

“It’s all in the hopper,” said Christina D. Romer, chairwoman of the president’s Council of Economic Advisers. “It would be irresponsible if we weren’t thinking about these kinds of programs.”

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The official end of the recession will be determined by the National Bureau of Economic Research. Its business cycle dating committee looks at output as well as other indicators like employment to make that call. The group spent a year examining data before declaring that the recession had begun in December 2007.

Some economists say they expect the panel will eventually decide that the recovery began sometime this summer.

More than 650,000 jobs have been saved or created under President Barack Obama's economic stimulus plan, the White House said Friday, saying it is on track to reach the president's goal of 3.5 million jobs by the end of next year.White House: 650,000 jobs in new stimulus report:

New job numbers from businesses, contractors, state and local governments, nonprofit groups and universities were not scheduled to be released publicly until Friday afternoon. But White House economic adviser Jared Bernstein says officials have been told the figures. When adding in jobs linked to $288 billion in tax cuts, Bernstein says the stimulus plan has created or saved more than 1 million jobs.

The data will be posted on recovery.gov, the web site of the independent panel overseeing stimulus spending.

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When it is released Friday, the new data will be the largest and most complete look at how the stimulus has been spent so far. The White House promised the data would be far more reliable than the first batch of numbers on federal contracts, which the administration initially embraced, then branded a "test run" after thousands of errors were discovered.