Yesterday at my home blog, in the wake of Uncle Sam's reduction of third-quarter growth in gross domestic product (GDP) from an annualized 2.0% to 1.8%, I predicted that the establishment press's reaction would be the following: “Yeah, but the fourth quarter will be 3% or more. It really, really will be. Please believe us.”
Martin Crutsinger at the Associated Press made that easy prediction come true 48 minutes after the report was released. He and the rest of the establishment press also missed something far bigger, namely that yesterday's small GDP reduction brought its private-sector component back to a level below where it was at the beginning of the recession, no matter how you define that beginning. Excerpts follow the jump:
Economy grew more slowly in summer than thought
The U.S. economy grew more slowly in the summer than previously thought because consumers spent less than the government had first estimated. But economists expect growth in the current October-December quarter to be stronger.
The Commerce Department says the economy grew at an annual rate of 1.8 percent in the July-September quarter. That was the fastest growth this year, up from 1.3 percent in the April-June quarter. But it was down slightly from last month's estimate that the economy was expanding at a 2 percent rate in the summer.
The government now estimates that consumer spending grew at a 1.7 percent annual rate last summer, instead of 2.3 percent. The updated estimate reflects data showing less spending on hospitals.
Economists think the economy is growing at an annual rate of more than 3 percent in the final three months of this year. That would be the fastest pace since a 3.8 percent performance in the spring of 2010.
Among the positive factors are a brightening job market, strong holiday shopping, further gains in factory production and cheaper gas prices, which leave consumers with more money to spend on other items.
Stronger growth would be needed to significantly drive down the unemployment rate. Unemployment did fall to 8.6 percent last month after remaining around 9 percent for 2 1/2 years. The rate is now the lowest since March 2009, two months after President Barack Obama took office. Unemployment passed 9 percent that spring and had stayed there or higher for all but two months since then.
Marty's message: "Hey, things were really pathetic during the first three quarters of this year. But they're really okay now and getting better. Trust us." Though the linked report is still available at the "hosted2.ap.org" site, the AP's main site doesn't have it. It's been revised and replaced by a report yesterday evening from Crutsinger and Daniel Wagner which concentrates far more on yesterday's report on initial unemployment claims, and holds out the possibility that fourth-quarter growth might be an annualized 4% (write that one down, and save it for the end of January 2012 -- and then the end of March after subsequent revisions).
Here's the proof that the private sector is still smaller than it was before the recession began, regardless of whether you think it began after the second quarter of 2008, the normal definition, which requires at least two consecutive quarters of economic contraction, or after the end of 2007, the subjectively determined beginning point according to the National Bureau of Economic Research (third quarter 2011 value is from Table 3 at yesterday's full release; 4Q07 and 2Q08 are shown here; figures are in 2005 chained dollars):
Additionally, as Investor's Business Daily graphically pointed out several months ago, the nine quarters it has taken the economy as a whole to get back to where it was when the recession began (as seen above, by the barest of margins) is three times longer than during any other post-World War II recovery. Also as seen above, the government component of GDP is up by over 2%. Broken down but not shown: Federal, +15.3%; State and local, -9.4%.
If we were seeing this kind of thing happen during a Republican or conservative administration, we'd be seeing historical references like the above invoked constantly by the establishment press. Instead, we get stone cold silence concerning references to the past, and Herbert Hoover-like "big improvements are just around the corner" utterances from a press looking desperately for meaningful improvement where what we have at best are decent early signs of it.
Cross-posted at BizzyBlog.com.