GDP report
Another poor GDP report from the BEA. There's no sense in sugarcoating it, but some commentators are excessively bleak. Mark Thoma, for example, quotes Calculated Risk as saying that "without the boost in inventories, GDP would have been barely positive in Q3." This is, I believe, the fifth report in a row in which it has been noted that the growth we're seeing is illusory because it's inventory-driven. To the extent that inventory growth represents production of domestically-produced goods, inventory growth creates employment and income, which generates consumption, which along with the original inventory adjustment adds to GDP. There's nothing wrong with GDP growth that is driven by inventory growth rather than something else, except insofar as we think inventory growth is a one-time phenomenon. But in this case inventory growth seems to not be a one-time phenomenon - it's been contributing to growth for 5 straight quarters! On the other hand, to the extent that inventory growth represents purchases of imported goods, it's really not a net contributor to growth and removing it wouldn't affect GDP: every dollar we subtract from GDP because it's investment in inventory of imported goods is added back in when we subtract the same purchases from the import line. I think the report is grim enough - no need to pile on.
There's something strange about, say, Dean Baker saying that "When an economy gets out of a steep recession, it should be soaring, not just scraping into positive territory" and using the 1982-83 recovery as a reference point, after people of a similar viewpoint (and I'm betting Baker himself!) have been saying for several years now that we should expect jobless recoveries from now on because the economy has fundamentally changed since the 1980s. The recovery has certainly not been as strong as I had forecast last year. I had thought that we'd do substantially better than the recoveries from the 1990-91 and 2001 recessions, but I never thought we'd do as well as the recovery from the 1981-82 recession. In fact, we've done a little better than the previous two recessions:
So should we be surprised that the recovery has not been stronger? No, not really. Should we be disappointed and hope for better? Absolutely. But if history is a guide - if this recovery is more like the last two than the one before - then the fact that growth was below par in the first year of the recovery does not mean it will not accelerate in the second.
There's something strange about, say, Dean Baker saying that "When an economy gets out of a steep recession, it should be soaring, not just scraping into positive territory" and using the 1982-83 recovery as a reference point, after people of a similar viewpoint (and I'm betting Baker himself!) have been saying for several years now that we should expect jobless recoveries from now on because the economy has fundamentally changed since the 1980s. The recovery has certainly not been as strong as I had forecast last year. I had thought that we'd do substantially better than the recoveries from the 1990-91 and 2001 recessions, but I never thought we'd do as well as the recovery from the 1981-82 recession. In fact, we've done a little better than the previous two recessions:
So should we be surprised that the recovery has not been stronger? No, not really. Should we be disappointed and hope for better? Absolutely. But if history is a guide - if this recovery is more like the last two than the one before - then the fact that growth was below par in the first year of the recovery does not mean it will not accelerate in the second.
Labels: economics, employment, GDP report, recovery
posted by Char Weise at 4:00 PM
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