Archive for October, 2010
Today we got the first estimate of the growth of the economy during the third quarter of the year. Annualized, it’s 2%, which is pretty anemic.
On the other hand, it is growth, which is a lot better than the decline and bottom of the previous three years. In fact, the GDP is now back to just 1% lower than it was before the recession.
Why, then, does it feel so bad?
- Employment growth lags GDP growth; employment is still near its bottom.
- People are saving more, and paying down debt. That’s good, but it slows down growth while it’s happening.
- In the past three years, the working-age population has risen.
- Had there not been a recession, three years of normal growth would have raised GDP to about 10% above where it is now. That’s the GDP level we need to return to full employment.
On the positive side, the FDIC did not have to close any banks this week. That trend has been looking better for the past six months.
Contrary to some opponents’ exaggerations, Obama’s supporters did not think the was the messiah, and do not expect miracles.Â Now he’s being accused of having failed to do miracles.Â That’s just blather.
The stimulus was designed as a balance between boost and debt.Â It was intended to be a parachute, not an airplane. Â The stimulus did, in fact, arrest the precipitous fall of the economy, which is now growing again.
There’s a shortÂ informative discussion here in The Economist.
The stimulus has largely had its impact, arresting the sharp drop in the economy and sparking improvements. Sadly, things are improving too slowly.
Still, today’s continued improvement in weekly new unemployment claims is another step in the right direction. The level of the four-week moving average is back down to where it was in Fall, 2008, before the bulk of the layoffs. It’s been bouncing around this level for eight months, though. A little more stimulus might go a long way, but that won’t happen until after the election, at best.