US Economy grew by 3.5% in 3rd quarter

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**Frazzled**

Here's to hoping there's no double dip recession.

http://www.washingtontimes.com/news/2009/oct/29/government-report-should-show-economy-recovering//print/

Economy grew by 3.5% in 3rd quarter

Patrice Hill

UPDATED:

The government reported Thursday morning that the economy surged out of its longest recession since World War II and grew by 3.5 percent in the third quarter, spawning hopes for a lasting recovery.

The return to growth was fueled in part by two popular government programs the "cash for clunkers" auto trade-in program and a first-time homebuyers tax credit as well as a turnaround in manufacturing after the spring bankruptcy of two U.S. automakers.

But even as evidence of a recovery emerges, doubts are returning about whether the resumption of growth will last for only a quarter or two. High unemployment of nearly 10 percent has left more than 15 million people with no jobs and little income, raising questions about how much consumers can contribute to the recovery.

Moreover, recent reports have shown that a budding revival in the housing market may already be fizzling in anticipation of the expiration of the $8,000 homebuyers tax credit on Nov. 30. Consumer confidence also slipped last month amid rising joblessness, and auto sales have cratered by 35 percent since the expiration of the clunkers program this summer.

"The data highlighted concerns about continuing weakness in the American job market, and in turn raised doubts about the American consumers ability to generate growth in the economy," said David Starkey, a trader at Custom House, a Canadian investment firm.

"Its hard to imagine a U.S. recovery making any meaningful headway while unemployment is still rising."

While hopes for a recovery spurred gains of more than 50 percent in major stock indexes from March to October, news about a stall in the economy this week has renewed worries about the durability of the recovery in the stock market, sending the Dow Jones Industrial Average down by more than 118 points on Wednesday.

"The outlook for 2010 remains clouded," despite a strong upturn in manufacturing this summer with the reopening of auto plants shut down during the bankruptcy of GM and Chrysler and a movement toward restocking depleted inventories by businesses around the country, said Cliff Waldman, economist with the Manufacturers Alliance.

Inventory rebuilding may keep factories humming for a while longer, but "excess capacity will be an impediment to a business investment turnaround while a soft global economic rebound will likely preclude a strong recovery in overseas sales of U.S. manufactured goods," he said.

**Wrexasaur**

http://www.washingtontimes.com/news/2009/oct/29/government-report-should-show-economy-recovering//print/ wrote:But even as evidence of a recovery emerges, doubts are returning about whether the resumption of growth will last for only a quarter or two. High unemployment of nearly 10 percent has left more than 15 million people with no jobs and little income, raising questions about how much consumers can contribute to the recovery.

Wait... what? Maybe I am nitpicking, maybe I am not... but seriously though, 30 million people (or make it clear WT.com... god help you, make it clear), and no income. How hard was that? Geez... oh, and while were at it, try 12-15% as a real number next time.

Frazz wrote:Here's to hoping there's no double dip recession.

Cheers to that mate.

**Kilkrazy**

This is cheerful news!

We must hope that the rebound isn't only thanks to stimulus packages.

**Wrexasaur**

Kilkrazy wrote:This is cheerful news!

We must hope that the rebound isn't only thanks to stimulus packages.

Is that even technically possible at this point? I am no economics buff, but I can't imagine the stimulus being able to account for all of that either way.

Isn't most of the stimulus "paid off" at this point?

**Envy89**

Now lets see what happens when the government runs out of money to hand out...

**Wrexasaur**

Envy89 wrote:Now lets see what happens when the government runs out of money to hand out...

Right... okay then...

http://247wallst.com/2009/10/29/deep-flaws-in-stimulus-package-report/

The $787 billion economic stimulus package is meant to save or create 3.5 million jobs. That goal may be much less important than it was when the package was first approved by Congress. Unemployment will go over 10% later this year and could average that though 2010. The stimulus package cannot come even close to plugging that hole.

The Administration is fond of putting out reports and making statements about how well the $787 billion investment is working. It is now clear that some of that was based on false data.

The AP did an exclusive study of documents related to stimulus job creation and found that the Adminstration’s count is shy by at least 30,000 workers. The research found that “some jobs credited to the stimulus program were counted two and sometimes more than four times.”

Don't get me wrong though... there are problems with this... and that too, and a banana as well, but all I wanted was steady work, and all they gave me was this T-shirt.

This is a link to AP, the other site is a bit messy.

**gorgon**

I think it's now mostly a matter of employers getting off the pot and hiring and spending. Once that happens, consumer confidence will build, they'll start spending too and things will really start to recover.

Seems like most economists are predicting a very long, slow recovery, but people also need to remember that those guys are rarely right, and few of them predicted either of the two recessions we've had in the past 10 years. (Which kinda starts to beg the question as to what good they are in the first place.) We could have a double-dip...or we could have a faster recovery than we think. The latter is absolutely on the table too. If economists could really predict the future, they'd all be fabulously, fantastically wealthy thanks to their shrewd investments made at exactly the right times. The fact that they're all not multi-billionaires tells you something about the predictability of the economy and financial markets.

@Envy -- I don't like huge spending and unbalanced budgets either, but without the government spending, this economy would have gone into a deep, dark hole. Money needs to be spent to keep our economy moving, and neither consumers nor the corporate sector were doing it.

**Waaagh_Gonads**

You have to remember that it fell a hell of a way, so a decent rise like this in context isn't that massive.

Australia didn't even get to a recession, we only had 1 quarter of negative growth.... Because we are the most awesome OECD country in the WORLD!!!

**Frazzled**

Fine rub it in.
(phones Cheney to put Australia on THE LIST).

**dogma**

gorgon wrote:
Seems like most economists are predicting a very long, slow recovery, but people also need to remember that those guys are rarely right, and few of them predicted either of the two recessions we've had in the past 10 years.

The problem wasn't so much predicting the recession, which a surprisingly large number of economists did, but developing the political clout to act on those predictions (assuming the economists in question didn't already feel the recession was necessary, which many also did). Or, at the very least, appoint someone willing to make them. Greenspan, for example, notably found his way into the Fed Chairman's seat for his tendency to hand-wave any possible recession as a failure of Fed policy.

That said, the long, slow recovery is certainly the safe stance to take. In part because most economic recoveries tend to be long and slow; especially taking our most relevant example, the Big D, as a weighted consideration, and given modern standards of 'slow'. But also because no one will be upset if the recovery is faster than expected.

**Frazzled**

Dogma's case in point:

2001 recession had 2002 in trough, 2003 in near trough with high growth in 2004/5 and growth therafter.

**Shadowbrand**

Well I'm happy to see our neighbour getting back on their feet!

**gorgon**

Frazz, to be fair, the second half of 2003 showed big GDP growth (best in 20 years-type stuff) and it was one of the best years for the financial markets ever. Small caps were up almost 50% and the S&P 500 almost 30%. So really we had an 8-month recession in 2001, with slow recovery in 2002 and some very strong recovery in 2003.

So when I see economists saying three years of very slow growth ahead, I say maybe or maybe not, that's all.

**Frazzled**

gorgon wrote:Frazz, to be fair, the second half of 2003 showed big GDP growth (best in 20 years-type stuff) and it was one of the best years for the financial markets ever. Small caps were up almost 50% and the S&P 500 almost 30%. So really we had an 8-month recession in 2001, with slow recovery in 2002 and some very strong recovery in 2003.

So when I see economists saying three years of very slow growth ahead, I say maybe or maybe not, that's all.

Sorry gorgie, to be clear I'm not referring to stock prices, but GDP growth and predominantly manufatcuring sector at that. At least on the manufacturing side, the turnaround didn't start popping until late 2003.

**Kilkrazy**

The stock market is often said to be governed by the "Bigger Fool" theory.

Someone selling their shares believes they will be worth less than now, and the person buying them believe they will be worth more.

Of course it's all more complicated than that.

The basic point is that consumer activity is the basis of all economic growth and people with no job and no income will minimise their activity.

**Orkeosaurus**

gorgon wrote:So when I see economists saying three years of very slow growth ahead, I say maybe or maybe not, that's all.

It's like meteorology.

There's too many variables for them to always be right. Ignoring what they're saying entirely is stupid, though.

**Noble713**

I don't think we are out of it yet.

We have a 2nd housing bubble expanding:
http://www.latimes.com/business/la-fi-fha8-2009oct08,0,189550.story

And the government's debt is going to skyrocket due to reduced tax revenues, which exacerbates the already-bad situation caused by our massive spending.

None of the structural issues that brought us to this point have been adequately corrected. Individuals still have credit debt up to their eyeballs and banks are still over-leveraged. Running the greenback printing presses 24/7 fixes neither.

**Kilkrazy**

A bit of inflation, providing it doesn't get out of hand, is a neat way of inflating away people's debts, though it should be noted it punishes people living off savings and fixed incomes such as pensioners, so there is a moral argument against it.

**olympia**

Will you yanks please come to Ireland now and spend your money looking up your ancestors and playing golf