from Econompic Data blog:
And while real GDP is the real production of the economy, nominal GDP is important for a debt burdened economy as debt is in nominal terms. Since the recession started in December 2007 nominal GDP is cumulatively negative (over 7 quarters), something that has not happened since WWII.
Some recovery.
And from Market Talk:
The downward revision in 3Q GDP isn’t a surprise, but it also shows that anyone expecting a rapid recovery may need to think again.
The government said GDP rose 2.8% in 3Q, down from its initial 3.5% estimate, reflecting a wider trade deficit and lower consumer spending. The growth measure fell 0.7% in 2Q.
Nearly 3% growth is a welcome change from a declining figure, but the Economist’s Free Exchange blog reminds that the economy needs multiple quarters of even more rapid growth to reduce the unemployment rate.
In the two years following the 1982 recession, the economy grew at a more than 5% annual rate, but unemployment still hovered above 7%.
“The key takeaway is that cyclical unemployment is very high, and growth rates are not high enough, at present, to bring unemployment down,” blog says. “That both the Fed and the federal government are sitting on the sidelines is quite troubling.”
Princeton economist Paul Krugman is even more pessimistic about the downward revision.
This is really quite grim. At this growth rate it’s far from clear that we’re doing anything to reduce the output gap — the gap between what the economy could produce and what it’s actually producing. Correspondingly, there’s no reason now for even a bit of optimism on unemployment.If growth continued at a 3.5% annual pace, Krugman says the US wouldn’t see full employment for another decade. “Given the latest number, the date at which we can expect to see a return to full employment is…never.”
There’s also no guarantee that the economy will keep growing at this pace. He argues the effects of government stimulus have peaked and will turn into a “net drag” in 2H10. And he doesn’t think the inventory bounce in 3Q is sustainable.
“Basically, we may be in a technical recovery, but we’re not recovering,” Krugman writes.
