Revised Q2 numbers came out, and they "unexpectedly" were revised down.
The 2.4 percent growth rate logged in the April-to-June quarter was slightly less than the 2.5 percent pace economists were forecasting. It was the weakest since a 1.6 percent pace in the third quarter of last year, when a record streak of four straight losing quarters came to an end.
"The economy is growing but not enough to make most Americans happy. At this weak pace, it will take more time than many hoped for people to really feel the benefits of this upturn," said Joel Naroff, president of Naroff Economic Advisors.
In the revisions issued Friday, the government estimated that the economy shrank 2.6 percent last year -- the steepest drop since 1946. That's worse than the 2.4 percent decline originally estimated. The economy's plunge underscores why the unemployment rate surged to 10.1 percent in October, a 26-year high.
With the economy growing at a subpar speed, the current 9.5 percent unemployment rate is not expected to fall.
It takes about 3 percent growth in gross domestic product just to create enough jobs to keep pace with the population increase.
Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the Obama administration nor the Federal Reserve expect that to happen.
2008 numbers were also revised (I've never understood how you can go back two years and "revise" numbers. A quarter or two, that I get. But two years?), and those numbers are now saying the recession was worse than we thought:
The revisions in gross domestic product, or GDP, now show zero growth in 2008. That compares with a 0.4 percent gain previously estimated.The economy also grew less in 2007 (1.9 percent) than earlier thought (2.1 percent).
For all three years, consumers spent less and home builders cut more deeply than had been thought. Those factors help explain the downward revisions on the economy.
The revisions also show that struggling state and local governments cut spending more last year than previously thought. And they spent less in 2007 and 2008.
The economy slid into its worst recession since the Great Depression in late 2007. Many economists think the recession ended last summer, although a panel of academics that dates the start and end of recessions hasn't declared when this one ended. The panel usually does so well after the fact.
From the start of the recession in December 2007 until the April-to-June quarter of 2009, the economy sank 4.1 percent. That was deeper than the 3.7 percent decline previously estimated for the recession.
Calculated Risk has more info as well, including this nice chart:
Quarter GDP GDP Revised Change 2007-I 1.2% 0.9% -0.3% 2007-II 3.2% 3.2% 0.0% 2007-III 3.6% 2.3% -1.3% 2007-IV 2.1% 2.9% 0.8% 2008-I -0.7% -0.7% 0.0% 2008-II 1.5% 0.6% -0.9% 2008-III -2.7% -4.0% -1.3% 2008-IV -5.4% -6.8% -1.4% 2009-I -6.4% -4.9% 1.5% 2009-II -0.7% -0.7% 0.0% 2009-III 2.2% 1.6% -0.6% 2009-IV 5.6% 5.0% -0.6% 2010-I 2.7% 3.7% 1.0% 2010-II 2.4%
On the "plus" side, the variance between the original estimates and the revisions are getting closer, suggesting we are understanding the data better from the onset. On the "minus" side, GDP is dropping over the last two quarters. Remember that we need to have GDP right around 3% to keep the status quo in regards to jobs, and a GDP around 5% for a full year to lower unemployment 1%.
As I've said many time before, we are still a long way from seeing the end of this..
