Matt Yglesias

29 Responses to “Q2 GDP Looking Stronger”

1. right Says:
   August 28th, 2008 at 10:07 am

   The previous estimate was an anemic 1.9 percent.

   I’d characterize 1.9% as “low but respectible” under normal circumstances. The only reason to call it anemic is because it included the stimulus payouts, which were supposed to boost consumer spending. Which, on second revision, apparently they did.

   I’m not really sure I understand how to square that with the employment data which doesn’t seem consistent with that level of growth.

   Yeah, the employment data doesn’t look good. The optimistic view would be that unemployment hasn’t gone up as much (yet) or reached as high a level in absolute terms (yet) as in previous recessions. I’m not that optimistic however.

   You still often hear the 2000 election talked about as if it occurred at the height of the Clinton-era boom when in fact conditions had already slipped quite a bit from their 1999 peak.

   Indeed, which is why Bush never took much heat for the 2001 recession: everyone could see it coming before the election.

2. T-Rock Says:
   August 28th, 2008 at 10:26 am

   I hadn’t noticed but you’re right, people often talk about the 2000 election as if the boom had still been going on. At the time the Republicans were grousing that the economy was already slowing down, and that they would get the blame if the country went into recession. Which they did not, because September 11 removed the economy from politics.

   Interesting bit of historical fog there.

3. Matt Says:
   August 28th, 2008 at 10:40 am

   There’s no serious disconnect with employment to explain. The the R-2 relating employment growth and GDP growth since 1970 is just 0.44. Employment growth “explains” only 44 percent of the variation in GDP growth. Given the 0.6 percent annualized decline in employment in Q2, one would have expected GDP to grow by just 0.5 percent. But the standard error of that estimate is more than 2.5 percentage points. The reported 3.3 percent growth rate counts as only slightly unusual.

4. Splotto Says:
   August 28th, 2008 at 10:58 am

   If you hand out $160 billion every quarter you will get great GDP numbers.

5. poliwog Says:
   August 28th, 2008 at 11:00 am

   Clearly Schmidt gives McCain a cookie at each “Country First” mention.

   Has anybody begun seeding the counter “Country Club First” meme? And if not, in God’s name why?

6. Jeffrey Davis Says:
   August 28th, 2008 at 11:06 am

   NEBR measures a recession from peak to trough. The peak economic activity from which they pegged the recession came in March of 2001. W had spent the fall of 2000 “talking down” the economy so nobody was more surprised than he that the economy turned down in March.

7. stefan Says:
   August 28th, 2008 at 11:07 am

   The contribution of net exports to this 3.3% growth? 3.3%. A sign of what is to come: US production will go up, the the extra output will go to foreigners, the reverse of what has happened for the last 25 years or so. 10 years of this should bring the trade account back to a sustainable level.

8. Botswana Meat Commission FC Says:
   August 28th, 2008 at 11:15 am

   Regarding job numbers:

   I just read today that, here in Atlanta, the unemployment rate for those with college degrees is only 2.4 percent. For those without H.S. diplomas: 8.5 percent.

   Maybe the economy is growing, but transitioning to one that just needs a LOT fewer uneducated people. Hopefully we can do something so that these people don’t become pitchfork-wielding mobs!

9. tlaskawy Says:
   August 28th, 2008 at 11:56 am

   Matt,

   I recommend Barry Ritholz’s blog excellent economics The Big Picure on general principle. But he has a post up today explaining things:

   http://bigpicture.typepad.com/comments/2008/08/gdp-33.html

   As he observes, the revision has to do with a rise in exports and a delay in accurate reporting of government spending. As Barry says, we’re in a “domestic recession” at the moment. But now the dollar is strengthening and exports will fall, ie GDP won’t sustain at this level.

10. Njorl Says:
    August 28th, 2008 at 12:00 pm

    ” I’m not really sure I understand how to square that with the employment data which doesn’t seem consistent with that level of growth.”

    The US is the 4th largest oil producer in the world. The value of that oil doubled over the same quarter last year. That’s about $180 billion* of growth in a $14 trillion dollar US economy, or 1.3% growth just from the oil we pumped being worth more. It isn’t the kind of growth that necessarily reflects a healthy economy.

    *I extrapolated over a full year.

11. allbetsareoff Says:
    August 28th, 2008 at 12:07 pm

    I’ve long been suspicious of these meta-economic indices, which seem to be more useful as talking points than as measurements of the real economy. (Kind of like the cost-of-living index that omits energy costs.) Where I live, wages below the professional-executive level are stagnant (falling when inflation is factored in), job creation is net-negative, franchise and independent merchants are going out of business, houses aren’t selling, and the kinds of domestic crime common in bad economic times are on the rise.

12. right Says:
    August 28th, 2008 at 12:16 pm

    That’s about $180 billion* of growth in a $14 trillion dollar US economy, or 1.3% growth just from the oil we pumped being worth more. It isn’t the kind of growth that necessarily reflects a healthy economy.

    That’s not right. The calculation for GDP growth subtracts imports, so this increase is more than offset by the vastly larger amount spent on importing foreign oil.

13. Kolohe Says:
    August 28th, 2008 at 12:20 pm

    I’ll note as a political observer that it’s important, for the purposes of political analysis, to have accurate information about economic growth. You still often hear the 2000 election talked about as if it occurred at the height of the Clinton-era boom when in fact conditions had already slipped quite a bit from their 1999 peak.

    There’s always a lag between the actual state of the economy and the perception of the economy (in both directions up and down – the George I economy was not quite as bad in fall ‘92 as it had been earlier in the year.) One is because we only get the figures after the fact, (and as we see here, even in hindsight they bounce around) And more importantly, politics is about personal anecdote (i.e. what everyone feels is their reality) rather than any gross data. And it takes a while (i.e probably half a year) for people to notice the upturn or downturn in their personal circumstances. Although it is definitely quicker on the way down – you understand when you are laid off from your job pretty darn quickly, but when you get a new job, it takes a little longer to get the impression that it’s sustainable.

14. Njorl Says:
    August 28th, 2008 at 1:32 pm

    “That’s not right. The calculation for GDP growth subtracts imports, so this increase is more than offset by the vastly larger amount spent on importing foreign oil.”

    The well-head purchase price is established long before the oil is pumped. That doesn’t change domestic effects of commodity prices on GDP since it is pumped, bought and sold here, but it does affect imports. The oil now on tankers being shipped to the US was purchased for probably less than $50/barrel. Some of it was purchased via options bought as far back as 2001, for very, very low prices.

15. kafka Says:
    August 28th, 2008 at 2:21 pm

    The economy was made “stronger” in the time-honored American Way – borrowing more money (”stimulus checks”). Who cares that the “stronger” economy was bought with weaker balance sheets? Our kids are picking up the tab.

16. spencer Says:
    August 28th, 2008 at 2:49 pm

    The strong growth number had essentially nothing to do with the rebates.

    Of the 3.3% growth rate 3.1 percentage points was accounted for by trade.
    Out of the 3.1 percentage points from trade 1.65 percentage points was from exports. This was due largely to strong growth abroad and had nothing to do with rebates.

    The remainder of the 3.1 from trade was a contribution of 1.65 percentage points from weak imports. the weak imports were essentially a lagged function of earlier weak final domestic demand, especially of oil.

    Note, I’m using percentage points rather that percent because these numbers of additive.

    Put the real point is we now export much of the domestic weakness. Use to if demand was weak it lead to a cutback in domestic production. Now if demand is weak we reduce imports from China and this counts as a positive for gdp.

17. frank Says:
    August 28th, 2008 at 4:11 pm

    the GDP number is directly effected by the CPI. If you believe, as I do, that the CPI is jiggered by hedonic indexing and not really representative of actual inflation rates, then the GPD number is phoney too.

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