Economy returns to growth

[Parkbandit]

WASHINGTON (Reuters) - The U.S. economy grew in the third quarter for the first time in a year, beating market expectations, as consumer spending and new home-building rebounded, signaling the end of the worst recession in 70 years.

The Commerce Department, in its first estimate of third-quarter gross domestic product on Thursday, said the economy grew at a 3.5 percent annual rate, the fastest pace since the third quarter of 2007, after contracting 0.7 percent in the April-June period.

The growth pace in GDP, which measures total goods and services output within U.S. borders, was above market expectations for a 3.3 percent rate. The economy last grew in the second quarter of 2008.

"Better than expected GDP is confirming that the Great Recession has ended," said Kevin Flanagan, fixed-income strategist for Global Wealth Management at Morgan Stanley in Purchase, New York.

"The question going forward is, is this more of a statistical recovery or are we going to get some meaningful momentum on a sustained basis."

U.S. stock index futures prices rose after the economic data. The dollar rose against the yen, and U.S. government debt prices extended their decline on the better-than-expected reports.

Recessions in the United States are dated by the National Bureau of Economic Research and the private-sector group often takes months to make determinations. The economy slipped into recession at the end of 2007 and has been in the worst downturn since the Great Depression of the 1930s.

The third-quarter recovery was generally broad-based, with solid gains in consumer spending, exports and home construction.

It was also driven by government programs like the popular discount on some new motor vehicle purchases, which stimulated auto sales and production, and a $8,000 tax credit for first-time home buyers.

The auto discount program ended in August and the home tax credit is due to expire next month. In the absence government support, there are fears that the sprouting economic recovery could falter, with rising unemployment also inflicting damage.

Consumer spending, which accounts for over two-thirds of U.S. economic activity, surged at a 3.4 percent rate in the third quarter, the fastest advance since the first quarter of 2007. Spending fell at a 0.9 percent rate in the previous quarter.

Residential investment, which was the main force behind the downturn, jumped at a 23.4 percent rate in the third quarter, contributing to GDP for the first time since 2005, after declining 23.3 percent in the April-June period.

The surge in consumer spending and residential investment was likely driven by government stimulus programs.

The economic recovery in the third quarter was also supported by a sharp moderation in the pace of inventory liquidation by business. Business inventories fell $130.8 billion, slowing from a record $160.2 billion plunge in the second quarter.

The change in inventories added nearly 1 percentage point to real GDP in the third quarter.

Analysts are hoping that the slowdown in the inventory decline by businesses will continue to support the economy in the fourth quarter, even as consumer spending is expected to retreat under the weight of the worst labor market in 26 years.

Excluding inventories, GDP rose at a 2.5 percent rate compared to a 0.7 percent increase in the second quarter.

The weak dollar boosted exports, but a rise in imports subtracted from real GDP during the quarter. Federal government spending contributed to growth, but both state and local governments were a drag.

Business investment fell at 2.5 percent pace, with investment nonresidential structures dropping 9 percent, a reflection of ongoing problems in the commercial property market.

A separate report from the Labor Department showed the number of U.S. workers filing new claims for jobless benefits dipped by 1,000 last week to 530,000 last week.

Analysts polled by Reuters had forecast claims to fall to 521,000 last week from 531,000.

Continued claims of people still on jobless aid after an initial week of benefits slid by 148,000 to 5.797 million in the week ending October 17. It was the lowest reading since March.

http://finance.yahoo.com/news/Economy-grows-in-Q3-rb-243710096.html?x=0&.v=5

Some good economic news finally.

[Keller]

So the sky isn't falling?

[Parkbandit]

So the sky isn't falling?

Who said it was?

I think, by definition, the recession is over. We will see if this trend continues though.

[Keller]

Who said it was?

I think, by definition, the recession is over. We will see if this trend continues though.

Politicians. Journalists.

I am happy with the news. But, like you said, it just needs to continue.

[Clove]

We don't adhere to economic definitions here.

[Archigeek]

And yet, in my industry (architecture) the unemployment rate sits stagnant at 35-55%, depending on geographic location. I'll give all of my unemployed friends a call though, to let them know it's over.

[Clove]

And yet, in my industry (architecture) the unemployment rate sits stagnant at 35-55%, depending on geographic location. I'll give all of my unemployed friends a call though, to let them know it's over.Tell them to stop drawing pictures and get a real job.

[AnticorRifling]

I would have them build a bridge and get over it.

ZING.


But seriously that is a brutal unemployment rate for that (or any) sector.

[Atlanteax]

Clearly, Bush's economic policies will be redeemed/validated as time goes on!

[Parkbandit]

Clearly, Bush's economic policies will be redeemed/validated as time goes on!

Not all of them. I think his tax cuts after 9-11 were key to turning our economy around fast.. but the blunder that has become TARP " "I've abandoned free-market principles to save the free-market system" will go down as a dismal failure that our children will end up paying for.

[Archigeek]

I would have them build a bridge and get over it.

ZING.


But seriously that is a brutal unemployment rate for that (or any) sector.

Yeah it's especially brutal for professionals. Construction workers can deal with it, because they have skills they can easily sell under the table during downtimes. That and they're accustomed to seasonal work with long downtimes, so they work accordingly: long work weeks for six months, followed by a couple of months downtime is fairly normal. Architects... these days we're frail desk jockies who melt in sunlight. You can do some work free lance, but it's a lot harder to do and actually make some money, and the liability risks are high. When the economy is really recovered though, there won't be enough of us to do the work.

[Keller]

Not all of them. I think his tax cuts after 9-11 were key to turning our economy around fast.. but the blunder that has become TARP " "I've abandoned free-market principles to save the free-market system" will go down as a dismal failure that our children will end up paying for.

Aren't most people on this forum young enough to be your children?

:tumble:

[Parkbandit]

Aren't most people on this forum young enough to be your children?

:tumble:


I guess if people here are 13 and 15.. I know SOME individuals here that can be intellectually mistaken as a 13 year old...

[Cephalopod]

Good news, but the thought that we're going to have a near-jobless recovery is painful. Those unemployment figures are still stark and unhappy, especially since we see no consistent trend yet in claims going down.

[Clove]

Yeah it's especially brutal for professionals. Construction workers can deal with it, because they have skills...That is all.

[Atlanteax]

In the meantime, hopefully this kills the second "stimulus" pork-spending package under consideration.

[Latrinsorm]

This is directly attributable to President Roosevelt's PWA and related policies.

[Parkbandit]

In the meantime, hopefully this kills the second "stimulus" pork-spending package under consideration.

Much of this increase in GDP is being attributed to some government programs like Cash for Clunkers and the first time home tax credit. If it gets people in the right mindset and their outlook on the economy is better, then it's money well spent imo. It's all about consumer confidence that starts this economy rolling.

[CrystalTears]

Well there had been discussion of giving banks another stimulus package. I hope they nix that idea, if they haven't already.

[Kembal]

I'd expect the first time homebuyer tax credit to be extended. Unemployment benefits are obviously going to be extended. Another guess would be that the deadline for stimulus money to be allocated to projects will be extended by 3 months. (certain parts of the infrastructure spending have been delayed)

The big question, I think, will be state stabilization aid. A lot of states need more. (Although, California should be required to rewrite their constitution first, but that's a topic for another day.)

[Mabus]

In the meantime, hopefully this kills the second "stimulus" pork-spending package under consideration.
Using the current (revised after they were found to be false) recovery.gov numbers of 30,383 jobs created/saved, and the $787,000,000,000 price...

That's $25,902,642.92 per job created or saved.

What a deal!

[Kranar]

Actually 2.1 billion was spent saving/recoving the 30k jobs. That's 72k per job, not the 26 million per job as you suggest.

[Parkbandit]

Actually 2.1 billion was spent saving/recoving the 30k jobs. That's 72k per job, not the 26 million per job as you suggest.

Wait, what?

By the White House's account, 340 BILLION DOLLARS is at "work" in our economy to date. Are you saying that only .6% of the "Stimulus" bill is for job creation/"saving"?

[Kranar]

All I'm saying is that the 30,383 jobs referenced by recovery.org as having been saved or recovered is the result $2.1 billion in spending according to recovery.org.

[Keller]

I feel like I am watching a mouse sniffing around a mousetrap, being baited into taking the cheese.

[Apotheosis]

umm, where's the job growth?

[Revalos]

umm, where's the job growth?

The economy is growing because jobs aren't. Companies have found out that the level of worker productivity goes waaaaay up when their employees feel like they could lose their job. This costs the company very little, but can dramatically improve their profits since they can still fire people and cut costs in labor, but get more from the remaining workers.

We won't see real job growth for a long time, IMHO.

EDIT: Oh and the idea that we need to improve "US consumer confidence" by putting people to work so they can spend their money and that sort of thing to improve the economy is also unnecessary now that countries like China and India are beginning to turn around. We can boost our economy by cutting into the massive trade deficits to those two countries. Isn't globalization wonderful?

[Parkbandit]

The economy is growing because jobs aren't. Companies have found out that the level of worker productivity goes waaaaay up when their employees feel like they could lose their job. This costs the company very little, but can dramatically improve their profits since they can still fire people and cut costs in labor, but get more from the remaining workers.

We won't see real job growth for a long time, IMHO.

EDIT: Oh and the idea that we need to improve "US consumer confidence" by putting people to work so they can spend their money and that sort of thing to improve the economy is also unnecessary now that countries like China and India are beginning to turn around. We can boost our economy by cutting into the massive trade deficits to those two countries. Isn't globalization wonderful?

I disagree. We have positioned ourselves as the country of consumption.. most of our manufacturing has gone overseas.. we export less than we import. If we don't turn consumer confidence around in this country, our economy will never rebound simply because we consume more than we manufacture.

[Revalos]

I disagree. We have positioned ourselves as the country of consumption.. most of our manufacturing has gone overseas.. we export less than we import. If we don't turn consumer confidence around in this country, our economy will never rebound simply because we consume more than we manufacture.

We may have positioned ourselves as that country last century, but we are being rapidly overtaken by the new middle classes of Asia as consumers with buying potential. And we helped build their massive manufacturing sector too. We may still return to overconsumption, but we will be competing with those markets now too.

This century, we have been trying to position ourselves as a 4th generation economy (moving away from the 3rd gen service economy to the information economy). Houses, cars, credit card purchases, all of these things at the root of the economic collapse because they were never actually "owned" by most consumers, just rented at interest. But, look at the iPhone/iTunes, Netflix, Facebook, the Wii, and other information economy successes during these troubled times.

Intangibles are what the US consumer wants more of these days....apps, wireless connectivity, video games, and the like. We may still "need" tangible goods, but I am wagering that people have begun to realize that they may not "want" as much as they used to and are transitioning towards the information being the consumer desire beyond the necessities.

I don't see a rebound. I see a completely changed economy in the next 15 years. Green initiatives in energy, recycling, and construction are going to be the focus of economic recovery, not manufacturing directly. We could not keep going on the path we used to be travelling.

[Sean of the Thread]

Don't forget the war with Iran.

[Bobmuhthol]

The "green" shit is shit, but Revalos has a point. Countries naturally shift away from manufacturing and toward services as they advance.