The U.S. economy grew at an annualized rate of 2.8 percent in the last three months of 2011, the Commerce Department announced in an advance estimate Friday. The new figures help quell lingering fears of a double-dip recession, but economists say there remains cause for concern.
“At first glance, it looks good, because it’s the 10th straight quarter of economic growth,” Chad Stone, chief economist at the Center on Budget and Policy Priorities, told TPM. “But there’s an awful lot to be concerned about when you dig into the numbers.”
Stone noted that a large part of the gains came from businesses accumulating inventory — but much of it wasn’t sold. “So the excess capacity gap is not shrinking,” he said. This, he argued, reflects that the trajectory of aggregate demand — the more important indicator of economic strength — remains problematic.
It was the best quarter of the year, with some important improvements, but likely still not yet enough to erase the losses from the Great Recession, economists say. Gross domestic product grew at 1.8 percent in the third quarter.
The crux of the development was consumer spending and business inventory.
“The big story is inventories,” Dean Baker, co-director of the Center For Economic and Policy Research, told TPM. “They added almost 2 percentage points to growth in the quarter — they subtracted 1.4 percentage point in the [previous] quarter.”
Investment in equipment and software, Baker noted, is approaching pre-recession levels, with its share at 7.6, as opposed to 8.0 percent before the downturn.
But, Stone added, “Final sales grew very slowly in the final quarter, by just 0.8 percent. They were up a lot in the third quarter.”
The two economists also pointed out that shrinking government spending was a drag on the economy, in part because government jobs were lost on federal, state and local levels.
Stone continued that the situation in Europe could still have a major impact on the U.S. economy; meanwhile, he said at home it’s critical that Congress extend the payroll tax cut and unemployment insurance.
“If that doesn’t happen that would be a hit to the economy for sure,” he said.
Sahil Kapur
Sahil Kapur is a congressional reporter for TPM. He previously covered politics and public policy for numerous publications including The Guardian and The Huffington Post. He can be reached at sahil [at] talkingpointsmemo.com.
willia451 Thanks for the thoughtful and illuminating commentary. Very helpful.
it seems as though EVERYONE agrees that, even though th economy is headed in th right (correct) direction, "it's just not recovering fast enough."
everyone that is excepting some of th most respected economists among us. they all seem to agree that an economic collapse of th size and scope that we all experienced at th end of Bush/Cheney's 2nd term, takes 5 to 6 years to recover from. so at this pace, considering th obstructionism from th repubs in th House and Senate, th economy's rebound is something of a miracle!
The Republicans continue to say the president's policies have failed, yet he has not been able to pass very much of his policy due to their obstruction, Doesn't this imply that had the president been able to put in his whole package of policies, the economy would be doing much better? This also speaks to the fact that the Republicans have been willing to trash the economy, just to try and hurt the president.
If the mere number 2.8% doesn't do it for you try looking at a few charts of where we were at the end of the bush-dick debacle compared to where we are now & are headed. All of this with non-stop obstruction by the perpetrators of the collapse that apparently need a little more recession to satisfy there needs & need to see our President fail so they don't get the blame that they sorely & truly deserve.
President Obama is getting the job done even with the backdragging GOP & financial world working against him & a bad global economy brought to you by the same obstuctionistas & bankers. The fact that we didn't go into full-on meltdown like the nation was headed for but instead are growing steadily in less than one term is pretty damned amazing. It inspires for what's to come.
leftflank Even if one complains (as one legitimately could) that the president hasn't moved as aggressively on many things as he could or should have, it's just absurd for Republicans to claim that Obama has made things worse.
Yet that's what they're trying to sell. And they'll probably find more than a few buyers... mostly among teabaggers, I'm guessing.
spas485; First off--I agree with you. I was pretty pissed at the President for quite a while not long ago but constantly pulled for him to get better. He has, by leaps I believe.
Second--read the comments on one of those alaric links & you'll get a good idea of whom the buyers are. Not one of those people can see past their nose & start out with blind hatred. There isn't a chart or reasonable argument that could crack that kind of rhetorical partisanship. There is a term for the ever wacko 30% or so of the electorate that aren't worth fighting for, I just can't remember it.
Consistent failure to vote for cloture in Senate + Republican House in 2011 + Default fight + Extension of Payroll tax credit/unemployment benefits fight = Rope a Dope.
spas485leftflank *Lots* of people are buying it. Is is latent and sometime unconscious racism? No idea, but they're convinced he's destroying USA. We've got plenty of work to do.
Overreach; right you are but it's more like rebuying it. It is generational, born & bred in. Like most problems, they've got to realize that there is a problem first & then they've got to want to change. There's a much better chance of the dying breed scenario happening than getting the obstinate, hateful, close-minded bigots to change.
Such is life, perfection cannot be attained, accept the things we have no control over & celebrate the victories for all they're worth!
OverreachTHIS Sigh. Quarterly figures are annualized. It's saying that if nothing changed, it would be 2.8% growth for a whole year.
truth-spinOverreachTHIS Thanks truth-spin; that's absolutely correct. I just want to add the funny part: even if those numbers weren't annualized, 2.8% growth per quarter for four quarters wouldn't be 11.2%, it would be 100*(1.028^4)-100 = 11.68%
Compound interest, folks.
truth-spin Okay, my bad. Sorry.
Why does Obama hate America?
First its this
http://online.wsj.com/article/SB100014240529702038...
Then this
alaric Why do wingnuts always think that linking to discredited far-right sources will somehow bolster an argument?
Why does alaric hate Obama?
alaric If the Free Market saves all, and government should stay out of it, then why on Earth is this Obama's fault or his alone to fix? BIg gluttonous corporations are sitting in massive profits. Why do they hate America?
Hoagiealaric No one hates America - at least not anyone who is normally listed after the pseudo-question: why does X hate America?
Companies are sitting on cash because they think it is in their interest to do so. They are waiting for opportunities, they are uncertain, they just love the idea of having it; whatever. But most certainly NOT because they hate America.
truth-spinHoagiealaric Pedantic much, spin-meister? Hoagie's question was clearly a snarky retort to alaric's moronic comment.
spas485truth-spinalaric The Most Reverand Spinster.
Oh happy days are here again. Let the Obama Wreckovery continue. Q4 numbers less increased inventory show a whole growth rate of .8. Given the trend of downward adjustments in the final numbers this will likely end up a half point lower.New home sales in 2011 continued falling from previous years to a record low. yep, the country's in the very best of hands.
Perhaps you would prefer a failing manufacturing base (GM, Chrysler, parts suppliers), home sales predicated on credit fraud, rising unemployment (let's say job loss in the range of 750K/mo.) and a bank bailout or two? Oh, no, I got it. Tax cuts and deregulation. That worked so well in the late 90s and early 2000s we ought to try it again. Then, there was savings and loan deregulation in the 1980s. That worked out great. Let's try that all again.
dwqwerty09 Yes, well home sales predicated on credit fraud was argued by Obama himself when he was senator. He wanted to force banks to approve home loans to the poor and minorities; the very people who couldn't afford them.
alaric Just what I would expect from someone who takes the screen name of a barbarian king whose claim to fame was sacking the capital of a decadent, declining empire.
alaric None of this changes what we all know very well: that you are an imbecile.
alaric You are just bitter that the obstruction of the Republican congress hasn't slowed the recovery enough to make Obama look bad.
We're still in the crapper. Any strong winds (Europe) could easily knock this economy down on both knees. Most critical - no demand. Why you wonder? Simple, no "living wage" jobs.
thisisjusttosayy It's not at all that simple. Sure, wage growth has been slow. But it hasn't been negative and it sure hasn't fallen off at a level that explains where we are today compared to five years ago.
truth-spinthisisjusttosayy Five years ago consumer demand was largely fueled by credit -- both expanded consumer credit (2005 and 2006 saw a consumer savings rate in the red, the first consecutive years that had happened since the early part of the Great Depression) and the housing bubble (homeowners thought they were "taking equity" from the increased value of their homes, when in fact they were simply borrowing more on them).
When wages don't keep pace in real terms with natural inflation, you get decreased demand. The middle class has been left behind as virtually all the productivity gains in the last thirty years have gone to the top earning percentiles. That kind of dynamic is not going to maintain widespread consumer demand at a level required by an economy in which consumer purchasing accounts for two-thirds of activity.
truth-spin Yes, it's not all that simple but it is critical to growth - generating revenue and discretionary spending - buying "things" instead of just paying bills.
To say "Sure, wage growth has been slow" is ridiculous. It's been stagnant, as in almost zero, for at least 30 years while worker productivity has increased, due to technology, by 50% during that time. But of course the worker benefits not a dime from these great productivity "breakthroughs".
I'm not laying this on Obama. It's the multinationals. In a sense they're killing the golden goose.
thisisjusttosayy Collectively, they may be to blame. But individually, they are being responsible. If company X decided to pay worker at the low end two times what they pay them now, what would happen? That company's products and services would be more expensive and as a result, people would buy from someone else. The end result would be that those workers would be worse off - because their company/factory closed than they were making the market wage, even if it was on the low side.
Sure, companies with a monopoly position or those with inelastic demand might be able to pull this off at the margins. Same for those companies or industries where worker wages make up a lower portion of total costs.
But over the long arc, prices tend to face pressure from the market and wages are no exception. More so when wages in other countries are so much lower and logistics have improved that make this workable.
truth-spinthisisjusttosayy "Collectively, they may be to blame. But individually, they are being responsible."
... which means that there's something wrong with the way the system itself is set up. This is a conclusion that is easily obscured when moralistic values are attached to the various players -- something that the left does too frequently but that the right does as a matter of reflex.
" If company X decided to pay worker at the low end two times what they pay them now, what would happen? That company's products and services would be more expensive and as a result, people would buy from someone else."
Your simplistic thought-exercise fails to account for the current situation, in which the savings from increased productivity is being used neither to raise workers wages nor to lower prices on the goods produced. The deciding factor on the price a company is able to charge for its products is NOT the cost of production. That's a factor, but clearly not one that sets the price point. What sets the price point is THE PRICE THE CONSUMER IS WILLING TO PAY FOR IT.
spas485truth-spin spas, you're being too nice. truth-spin is spinning a "simplistic thought-exercise" as you say. During a 20 year span Henry Ford sold about 15 million Ford Model T automobiles. Sure, at the time he had a monopoly but he priced the Model T as to be affordable to anyone making a "good salary". That included all his assembly line workers. Now that's genius! Ford Motor Company prospered because American workers prospered - with the help of the union movement of course. Multinationals today are all about squeezing every productivity percent they can out of the American worker without raising wages. Their business model is wealth concentration for the 1%. It's "working" today but it is unsustainable.
“The U.S. economy grew 2.8% in the last three months of 2011.” Not to nitpick, but I believe the economy grew at an annualized rate of 2.8% in the last quarter.
It is Government cutbacks are not just a drag becuase of those public sector jobs being cut back, but a sizable amount of private sector does a huge amounts of business with the Government. Upwards of 20% of sales for business equipment in companies like HP, Xerox, Dell, etc. are sales to the government (Federal and state). And that's just in the office electronics category. Everything from staplers, to pencils, to bigger ticket items show up on the balance sheets of private sector corporations.
Awful lot of really depressed Republicans out there. Still, Boehner, Cantor, McConnell and the rest of the R-Thugs will do their level-best to try to tank it before November.
Obviously we'd be doing far better if Republicans would agree to simply f**k off and die.
hrebendorf Precisely! This is what I have been advocating! It's not that I wish them ill, either -- it's just, you know, country first!!
You can tell ho good the economic news is by the conservative reaction. I saw some reaction to some recent undeniably good economic news that included assertions the figures were just made up. When they persist in arguing theories debunked by events, something has gotten better, and when they deny it's real, the news must be really good.
The key figure is he unemployment rate. If it keeps dropping, conservatives will go into a panic. If it gets below 8% by election day, Obama's chances of winning are decent. If it hits 7.5%, Obama can start working on his second inaugural address.
webcelt Well I'd just say don't count your chickens, or don't count so aggressively. No one thinks it's going to be 7.5.
If it shows steady progress and goes down toward 8.2, and no other disasters, he'll probably win but he's no shoo-in. That's probably the best scenario we can reasonably hope for.
OverreachTHIS If unemployment continues to drop at the rate it has since fall of last year, a month or two before election day it will be lower than when Obama was sworn in.
Lestatdelc
Exactly! And it will erase a misleading talking point by Repubs
rollotamasi13Lestatdelc The argument is so transparently pro-Demorat at that point: The economy approves when Republicans do nothing. It only worsens when they do anything.
You'd think they could read the tea-leaves and get onboard. But I'm learning to never underestimate the illiteracy of the Republican party.
Economy improves = GOP cries and pretends it didn't.
"The two economists also pointed out that shrinking government spending was a drag on the economy, in part because government jobs were lost on federal, state and local levels."
It would be nice if our friends on the right would understand this basic and simple concept.
reduced federal spending = reduced economic growth
And increasing demand = increasing jobs = increasing demand. Decreasing demand = decreasing jobs = decreasing demand. Less public sector jobs = less demand = less public and private sector jobs. Chicken and egg sort of thing.
dwqwerty09
By this logic, let's spend another trillion dollars and really prime thing. Or how about $10 trillion? Do I hear $100 trillion at which point we'll have full employment and not a care in the world... I mean, where does it stop?
Sure, you'll say that I am being absurd, and I am. But where does it cross over from being a sound idea to a bad one? What if we have already passed that point?
Within the current global context, I agree that since we can borrow for almost zero future value cost, we ought to consider doing so for anything that needs to be done that has a long term payoff, such as infrastructure.
But the global context also instructs us that such cheap borrowing can be taken just as quick as it is given (see the PIIGS et al.). So we must be working toward solvency and to do so requires that we recognize that we will soon need to be spending less per capita than we now do, even if we raise taxes.
truth-spindwqwerty09 What, in particular, should we be spending less on?
The deficit is a really big stick. To cut it down to size you have to whittle from both ends -- cutting spending and adding revenues. Now, let's not forget that your little reductio ad absurdum on government spending as economic stimulus can be turned on its head regarding taxes -- since GOP orthodoxy says cutting taxes creates jobs, we can achieve full employment by elminating taxes entirely.
@truth-spin dwqwerty09 That is being absurd, because no one is advocating that. Infrastructure spending is a very real need right now with our aging "physical plant," and while we can disagree on the wisdom of deficit spending, there are undoubtedly very real needs that can revitalize our infrastructe=ure, make us more competitive, provide jobs, and inject demand into our economy. Case in point, Florida Gov. Rick Scott turned down funds for high speed rail and was criticized by Dems for being partisan and obstructionist. But he also called for funds to look into expanding seaports, which is commendable. These are both worthy projects that should be examined. Expanding our seaports is needed to accommodate the larger ships that will be able to traverse the Panama Canal once its widening project is completed.
Estimates from the professional society of civil engineers indicate there are $2 to $3 trillion of needed infrastructure projects.
This will not be popular. But I'm going to say it anyway. The unemployment percentage for those that have a bachelors degree or higher just dipped slightly below 4%. For the most educated folks in any western nation, what you're looking for is a UP of somewhere between 2% and 4%. With 3% being the sweet spot. So we're close to being back to where we were before the Great Recession knocked us down. At least in that category.
So, why is everyone screaming about jobs, jobs, jobs? Because the unemployment percentage for those with less than a high school diploma stands at almost 14%. And if you DO have a high school diploma? 8.8%. Some college or an Associates Degree? 7.7%.
So bascially, from the standpoint of the most educated and unemployment, we're fine. And getting better every year. The others? Well, residential investment (housing) normally helps keep the UP down for folks in those categories. But, RI just started adding to GDP within the last couple of quarters (vice subtracting from it). A big improvement in the housing sector is what we need. But, as everyone knows, it was the housing bubble bursting that casued the Great Recession. And a full recovery in housing is still down the road a bit.
Bottom Line? Jobs, Jobs, Jobs is education dependent. If we threw out the numbers for those without a high school diploma, we'd be sitting pretty indeed.
Just saying.
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