The Obama administration released some bad news about the economy in the third quarter while receiving mildly good news about joblessness this morning. The final revision of the annualized GDP growth rate for the third quarter fell from the interim revision figure of 2.0% to 1.8%, highlighting the stagnation that has continued in 2011, and falling well below the initial estimate of 2.5%:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.8 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.
The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.0 percent (see “Revisions” on page 3).
The change between revisions comes from a reduction in personal consumption expenditures, the report says. That means that demand didn’t go up much at all in Q3, despite reports when the initial estimate was released that it represented a significant improvement in consumer activity. The Q3 number still improves on Q1 and Q2, but those two quarters had significant impact from the tsunamis in Japan and gas-price shocks, the effects of which have completely dissipated by now. The new number puts Q3 below the growth level of the final two quarters of 2010, which was only known for its Recovery Summer in the most ironic way possible.
Reuters, on the other hand, tries to find a silver lining:
U.S. economic growth was slower than previously estimated in the third quarter on a sharp drop in healthcare spending, but stronger business investment and a fall in inventories pointed to a pickup in output in the current period. …
Gross domestic product grew at a 1.8 percent annual rate in the third quarter, the Commerce Department said in its final estimate on Thursday, down from the previously estimated 2 percent.
Economists had expected growth to be unrevised at 2 percent. Though spending on healthcare dropped by $2.2 billion, spending on durable goods was stronger than previously estimated, indicating household appetite to consume remains healthy.
Actually, the report says that the difference was, as I noted earlier, from “a downward revision to personal consumption expenditures that was partly offset by an upward revision to private inventory investment.” That doesn’t sound like a great signal that the “household appetite to consume remains healthy.” In fact, real personal consumption expenditures rose only 1.7% in the quarter, although durable goods did go up 5.7% as a subset of that figure. Consumer spending growth of less than 2% is not “healthy” at all.
Now for the good news — weekly jobless claims remained at about the same lower level as last week:
In the week ending December 17, the advance figure for seasonally adjusted initial claims was 364,000, a decrease of 4,000 from the previous week’s revised figure of 368,000. The 4-week moving average was 380,250, a decrease of 8,000 from the previous week’s revised average of 388,250.
The advance seasonally adjusted insured unemployment rate was 2.8 percent for the week ending December 10, a decrease of 0.1 percentage point from the prior week’s unrevised rate.
The advance number for seasonally adjusted insured unemployment during the week ending December 10, was 3,546,000, a decrease of 79,000 from the preceding week’s revised level of 3,625,000. The 4-week moving average was 3,631,750, a decrease of 40,000 from the preceding week’s revised average of 3,671,750.
We’ve only been out of the 400K range for a couple of weeks, and December’s jobless metrics are always tricky, but it does seem that we have moved to a lower level of job instability. We are not at the level correlating with job growth, which is around 325K or lower, but we’re sneaking up on it. Reuters hails it as the lowest level since April 2008, which is true, but which also makes a bit of a hash of this curious assertion:
The level of unemployment claims has fallen in recent weeks, and analysts say fewer layoffs means employers are probably more likely to hire.
Economists at Goldman Sachs said earlier in the week that weekly claims below 435,000 pointed to net monthly gains in jobs. Their research was based on figures available through October.
Net monthly gains against what? If they mean net monthly gains against population growth, which is the measure they should be using, they’re very wrong. Even the reference to April 2008 is a giveaway. Were we adding jobs in April 2008, or were we losing jobs? And were we adding jobs at the 435K level in relation to population growth, or were we bleeding them at a rate that would normally require a tourniquet? It’s another variant of the 400K myth, and in this case it’s unnecessary, since the indicator really is going in the right direction, at least.