whattt whattt? stimulus spending helped grow the economy? But...I thought government spending can't increase GDP?
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Oct. 29 (Bloomberg) -- The U.S. economy grew in the third quarter for the first time in more than a year, propelled by stimulus-driven gains in consumer spending and home building.
The world’s largest economy expanded at a 3.5 percent pace from July through September, exceeding the median estimate of economists surveyed by Bloomberg News, after shrinking the previous four quarters, figures from the Commerce Department showed today in Washington. Household purchases climbed 3.4 percent, the most in more than two years.
Policy makers will now focus on whether the recovery, supported by federal assistance to the housing and auto industries, can be sustained into 2010 and generate jobs. The record $1.4 trillion budget deficit limits President Barack Obama’s options for more aid, while Federal Reserve officials try to convince investors that the central bank will exit emergency programs in time to prevent a pickup in inflation.
“A lot of this is thanks to government support,” Kathleen Stephansen, chief economist at Aladdin Capital Holdings LLC in Stamford, Connecticut, said in an interview on Bloomberg Television. “We still have major headwinds for the consumer. That worries me. The consumer, in fact private demand in general, is not ready yet to pick up the growth baton from the government.”
Stock-index futures jumped after the better-than- anticipated reading on growth. The contract on the Standard & Poor’s 500 Index was up 1 percent to 1,048.8 at 9:03 a.m. in New York. Treasury securities fell.
Jobless Claims
A report from the Labor Department showed 530,000 workers filed claims for jobless benefits last week, more than anticipated and signaling the job market is slow to heal even as growth picks up.
The economy was forecast to grow at a 3.2 percent annual pace, according to the median estimate of 79 economists surveyed by Bloomberg News. Estimates ranged from gains of 2 percent to 4.8 percent.
The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947.
The gain in consumer spending, which accounts for about 70 percent of the economy, “largely reflected” an increase in purchases of automobiles attributable to the administration’s “cash-for-clunkers” plan, the report said. The 22 percent jump in purchases of durable goods, which includes autos, was the biggest since 2001. Total purchases were forecast to climb 3.1 percent, according to the survey median.
Excluding Autos
Excluding the influence of auto sales, production and inventories, the economy grew 1.9 percent last quarter.
While most economists estimate the recession has ended, an official pronouncement will take many months to materialize. The National Bureau of Economic Research, based in Cambridge, Massachusetts, is responsible for determining when contractions begin and end. Robert Hall, head of the committee charged with making the call, said in August it may take more than a year for the group to reach a conclusion.
Residential construction jumped at a 23 percent annual rate last quarter, the first gain in almost four years and the biggest since 1986. The rebound added 0.5 percentage point to growth.
Homebuilding rebounded as sales climbed, propelled in part by an $8,000 tax credit for first-time buyers and Fed purchases of mortgage-backed securities that helped lower borrowing costs.
Inventories Drop
Total inventories last quarter continued to drop, boosting expectations that factory production will keep growing. The drop in stockpiles was smaller than the record decrease in the second quarter, contributing to growth, today’s report showed.
Trade subtracted from GDP as imports grew faster than exports, while government spending expanded at a 2.3 percent pace after jumping 6.7 percent in the prior quarter. A decline in state and local government outlays limited the overall increase.
The improving global economy helped companies from Amazon.com Inc. to Whirlpool Corp. exceed analysts’ sales estimates last quarter. Profits at about 85 percent of the companies in the Standard & Poor’s 500 Index that have released results beat expectations, according to Bloomberg data. That marks the highest proportion in records going back to 1993.
The S&P 500 closed at a one-year high on Oct. 19 and has dropped over the past four days on growing concern that the rebounds in housing and consumer spending will not be sustained.
Global Rebound
“You should see more expansion in the categories we’re in, as well as more geographical expansion over time,” Chief Financial Officer Thomas Szkutak of Amazon.com, the world’s largest Internet retailer, said on an Oct. 22 conference call.
In September, the unemployment rate reached a 26-year high of 9.8 percent, up from 7.6 percent from when Obama took office in January, figures from the Labor Department show. Economists project the jobless rate will exceed 10 percent by early 2010.
Since the recession began in December 2007, the U.S. has lost 7.2 million jobs. Payroll cuts peaked at 741,000 in January before falling to 263,000 job losses in September.
The economy will likely grow at a 2.4 percent annual rate from October through December, the median forecast in a survey earlier this month showed. GDP will also grow 2.4 percent next year and 2.8 percent in 2011, the survey showed, compared with an average of 3.4 percent growth over the past six decades.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
Well you being an economics man, you should know that GDP is unreliable at measuring economic activity. Even The National Bureau of Economic Research says that a positive GDP does not mean economic recovery.
Even thinking that the recession is over is stupid. There have been no changes in the system at all, the companies that created this mess have just grown larger. More debt and more government does not help the problem of too much debt and too much government.
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A statistic that can be manipulated as easily as GDP should not be used to gauge the economy’s health. The obese sedentary guy who takes a statin will end up with a low measured cholesterol level… and he’ll drop dead of a heart attack all the same.
Well you being an economics man, you should know that GDP is unreliable at measuring economic activity. Even The National Bureau of Economic Research says that a positive GDP does not mean economic recovery.
Even thinking that the recession is over is stupid. There have been no changes in the system at all, the companies that created this mess have just grown larger. More debt and more government does not help the problem of too much debt and too much government.
What are Phillip Greenspun's credentials as an economist?
You used a quote from somebody with no economics credentials in your post, so why should we trust anything you say?
Quote:
Q: Why doesn't the committee accept the two-quarter definition?
A: The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP, but use a range of indicators. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in 2007 and 2008.
there you go. BTW I agree with you, but if your going to argue with the "mighty" Frank, make sure you use legitimate sources or he'll just go off into his usual path of: moron, idiot, stupid, ignorant, I work on wall street I know everything, I go to a tier 1 school, etc.....
there you go. BTW I agree with you, but if your going to argue with the "mighty" Frank, make sure you use legitimate sources or he'll just go off into his usual path of: moron, idiot, stupid, ignorant, I work on wall street I know everything, I go to a tier 1 school, etc.....
is northeastern really tier 1?
__________________
crispy (krî'spë) adj. - Extra fresh
Who care's he's big time on Wall street. Has 6 Lambo's bro. Guy is sitin' on a swollen bank roll.
Yeah... jobless recovery! What a ****ing joke. Posting weekly about this economy is worse than matrix's predictions. Please refrain from these until we get some hard evidence, because frankly this is just a conspiracy posts at the core.
__________________
Maxpow
"The bureaucracy is expanding to meet the needs of the expanding bureaucracy."
— Thomas Jefferson
“A turbo: exhaust gasses go into the turbocharger and spin it, witchcraft happens and you go faster.”
— Jeremy Clarkson
1987 Nissan 200SX SE
Who care's he's big time on Wall street. Has 6 Lambo's bro. Guy is sitin' on a swollen bank roll.
Yeah... jobless recovery! What a ****ing joke. Posting weekly about this economy is worse than matrix's predictions. Please refrain from these until we get some hard evidence, because frankly this is just a conspiracy posts at the core.
I'm not sure you understand what hard evidence is....
I know 3.5% GDP growth in the 3rd Quarter is not hard evidence by any means.
__________________
Maxpow
"The bureaucracy is expanding to meet the needs of the expanding bureaucracy."
— Thomas Jefferson
“A turbo: exhaust gasses go into the turbocharger and spin it, witchcraft happens and you go faster.”
— Jeremy Clarkson
1987 Nissan 200SX SE
Like I was trying to say, a growing economy without any job growth doesn't help the people. Who really matters in this equation?
__________________
Maxpow
"The bureaucracy is expanding to meet the needs of the expanding bureaucracy."
— Thomas Jefferson
“A turbo: exhaust gasses go into the turbocharger and spin it, witchcraft happens and you go faster.”
— Jeremy Clarkson
1987 Nissan 200SX SE
Well you being an economics man, you should know that GDP is unreliable at measuring economic activity. Even The National Bureau of Economic Research says that a positive GDP does not mean economic recovery.
Even thinking that the recession is over is stupid. There have been no changes in the system at all, the companies that created this mess have just grown larger. More debt and more government does not help the problem of too much debt and too much government.
Most established economists would agree the recession will be declared to have been over either in august or September.
Industrial production numbers are up, and most wconomic indicators have bottomed.
The jobless recovery is for a few reasons. Firms are trimming and trying to raise their bottom line. Employment may lag for a while which is why we still need more stimulus measures.
The problem of "too much government" is a personal opinion, not any sort o fact.
Btw: sweet crash today.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
yeah but it means that the recession is over by technical definition
'Technical' definition means we have to see two consecutive quarters of rising GDP. But, like I posted earlier, that doesn't mean the recession is over.
Quote:
Originally Posted by Frank112916
The jobless recovery is for a few reasons. Firms are trimming and trying to raise their bottom line. Employment may lag for a while which is why we still need more stimulus measures.
The problem of "too much government" is a personal opinion, not any sort o fact.
Btw: sweet crash today.
Yea yea...More stimulus..right. What do you propose we do with the 85% left of the last stimulus? It hasn't been spent yet, so why do you think we need more stimulus?
More stimulus, again, will artificially inflate the GDP, making it seem as if the recession is ending. Of course when the government throws out billions of dollars and says "Spend!" the GDP will rise. What happens when that 'free' money is gone? Back to square one?
And we all know when the government gets involved, nothing ever works out.
'Technical' definition means we have to see two consecutive quarters of rising GDP. But, like I posted earlier, that doesn't mean the recession is over.
nay, if gdp is increasing, then we are not in a recession, we don't have to see 2 quarters of positive growth.
Quote:
Originally Posted by EricS9652
Yea yea...More stimulus..right. What do you propose we do with the 85% left of the last stimulus? It hasn't been spent yet, so why do you think we need more stimulus?
More stimulus, again, will artificially inflate the GDP, making it seem as if the recession is ending. Of course when the government throws out billions of dollars and says "Spend!" the GDP will rise. What happens when that 'free' money is gone? Back to square one?
And we all know when the government gets involved, nothing ever works out.
judging by this you don't have a firm understanding of spending multipliers, government spending, or economics in general.
__________________
crispy (krî'spë) adj. - Extra fresh
lol...Ok..give me a great reason why we need more stimulus when $593 billion of the $787 billion hasn't been spent yet.
I do not understand at all how anyone can suggest we spend more, when all of the first stimulus hasn't been spent.
It is utter nonsense.
I don't think you understand that stimulus spending is amortized in the accounting process... it's not like they account for every dollar that goes out - if you start a 100 million dollar project that gets amortized over a certain period, but will contribute towards GDP in the quarters preceeding.
From Mark Zandi (link below)
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The Great Recession has finally given way to recovery. This downturn will go into the record books as the longest, broadest and most severe since the Great Depression (see Table 1). The recession was twice the length of the average economic contraction, and it dragged down nearly every industry and region in the country. Its final toll in terms of increased unemployment and falling real GDP will be greater than that seen during any other recession on record....
[...]
The fiscal stimulus is also working. The American Recovery and Reinvestment Act passed early this year has reduced payroll tax withholding, sent checks to Social Security recipients, and provided financial help to unemployed workers whose normal benefits have run out. The cash for clunkers program revved up vehicle sales, and the housing tax credit has boosted home purchases.iii It is no coincidence that the Great Recession ended just as the stimulus began providing its maximum economic benefit (see Chart 1).iv The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery....
Criticism that only $175 billion of the $787 billion stimulus plan has been distributed through tax cuts and increased government spending is misplaced (see Table 2).v What matters for economic growth is the pace of stimulus spending, which surged from nothing at the beginning of the year to about $80 billion in the third quarter. That is a big change in a short period and is why the economy is growing again after more than a year....
The part of the stimulus providing the biggest bang for the buck—the most economic activity per federal dollar spent—is the extension of unemployment insurance benefits (see Table 3). Workers who lose their jobs before the end of 2009 can temporarily receive more UI, food stamps, and help with health insurance payments. Without this extra help, laid-off workers and their families would be slashing their own spending, leading to the loss of even more jobs....
Federal aid to strapped state and local governments also is providing significant economic benefits, lessening their need to slash programs and jobs or to hike taxes and fees. State and local tax revenues have fallen by nearly $120 billion during the past year, but government expenditures have merely gone flat, because federal grants in aid have soared by almost $110 billion (see Chart 2).vi The decline in income, sales, property and capital gains taxes has been unprecedented and shows only marginal signs of abating...
Quote:
Yea yea...More stimulus..right. What do you propose we do with the 85% left of the last stimulus? It hasn't been spent yet, so why do you think we need more stimulus?
More stimulus, again, will artificially inflate the GDP, making it seem as if the recession is ending. Of course when the government throws out billions of dollars and says "Spend!" the GDP will rise. What happens when that 'free' money is gone? Back to square one?
And we all know when the government gets involved, nothing ever works out.
1) See above
2) No, it bridges a gap between a fall in consumption and investment spending to boost velocity. It also causes a crowding in of investment by way of financial accelerators when coupled with proper monetary policy, as we're seeing now. The reason for more stimulus is because while there is a boost to GDP unemployment still remains high. Extending unemployment benefits, food stamps, and employing people in public projects will also lower the rate of default on mortgages and cause positive feedback loops.
3) No, we don't know this. This is the dumbest thing I've ever heard. the water you drink, food you eat, roads you drive on, sewage you flush, and the very internet you are using to post this crap is all made possible becuase of the government.
Your willful ignorance doesn't really surprise me. Becuase you're matrix. But that's a different story all together.
__________________ Abraham Lincoln- With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan — to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.
Last edited by Frank112916 : 10-30-2009 at 01:39 AM.
