Don't celebrate GDP growth just yet
GDP increases for first time in more than a year as government stimulus boosts consumer spending. Hold the champagne, however, as a weak labor market continues to subdue the recovery.
GDP rose 3.5% in 3Q, higher than the 3.2% growth economists were expecting, and much better than Goldman Sachs’ downwardly revised estimate yesterday of 2.7% growth.
“At long last, the American economy is growing again,” the Economist’s Free Exchange blog says. “Jobs, however, are still tricky to come by.”
Jobless claims remain elevated at 530,000 and even though continuing claims fell to their lowest levels since March, this mainly reflects exhaustion of benefits.
“So while the end to contraction has stopped the labor market bleeding, recovery has yet to begin the healing,” blog says. “Growth is good, but absent job creation it is difficult to get too excited.”
So, does 3Q GDP growth mean the longest recession since the Great Depression is actually over?
Tough to say at this point, especially considering all the factors the National Bureau of Economic Research uses to define a recession, FusionIQ CEO Barry Ritholtz writes at The Big Picture.
Jobs are still being lost at a rapid pace, industrial production is soft and retail sales have been essentially flat. NBER believes the economy’s either expanding or contracting, but Ritholtz says a third possibility should be considered: none of the above.
“The economy might have reached a state of stasis – a balance where it neither expands nor contracts,” he says.