3Q GDP Revised Down, But Current Employment Picture Improves
- Dec 23, 2011
The U.S. Department of Labor reported on Thursday that the number of Americans applying for unemployment benefits dropped 4,000 to 364,000 for the week ending Dec. 17. That was the lowest number since April 2008, before the worst of the Great Recession. Though volatile, the weekly numbers have been moving steadily down for all of December, and so has the four-week moving average, which is less volatile. At 380,250, the four-week moving average was down 8,000, to its lowest since June 2008, also before the panic in the fall of that year.
The report came not long after the Bureau of Labor Statistics reported separately that 43 states and the District of Columbia recorded month-over-month unemployment rate decreases in November, while only three states posted rate increases, and four states had no rate change. Forty-five states registered unemployment rate decreases from a year earlier, while only five states and the District of Columbia experienced increases.
On the other hand, the Bureau of Economic Analysis revised its estimate of U.S. economic growth for the third quarter of 2011 for the third and final time on Thursday, and the move wasn’t positive. Now the government figures that the annualized GDP growth for the quarter was 1.8 percent, 0.2 percent points less than the most recent estimate, and pretty thin gruel indeed. The main reason for the drop was a decline in health-care expenditures, a rare thing, since health care has had a persistent history of increases. Yet in the third quarter, its contribution to GDP was –0.07 percentage points, compared with +0.61 percentage points before the latest revision.
Things looking up for the fourth quarter
Still, despite the backward-looking gloom of the third quarter, everyone agrees the quarter—which included those hazy, crazy days of summer, when the Congress of the United States threatened to let the nation default on its very large debts, and euro-zone problems were inspiring riots—were nervous months, and nervousness slows down an economy as surely as panic stops one. That was then. The fourth quarter, which is almost over, seems like a different, more optimistic time, at least in the United States.
The Conference Board reported on Thursday that its Leading Economic Index increased 0.5 percent in November to 118.0 (2004 = 100), a rise that came on the heels of a 0.9 percent increase in October and a 0.1 percent rise in September. “November’s increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded,” Ataman Ozyildirim, an economist at the Conference Board, noted in a statement,
Also, the Thomson Reuters/University of Michigan’s sentiment index rose in November to 69.9 from 64.1 during October. Both the current conditions and the future expectations components of the index were up, with current conditions rising from 77.6 to 79.6, and expectations rising from 63.6 to 55.4. The November levels are still relatively low, but a lot better than in recent months, when consumer sentiment was at late-2008 levels. The November 2011 level is almost on par with the more optimistic days of early 2010.
Tax cut fracas sputters to conclusion
The pre-Christmas standoff in Congress over the payroll tax cut ended with a whimper on Thursday, with House Republican leaders acknowledging that their chamber would, on Friday, approve the two-month stopgap measure passed by the Senate last Saturday. The House could have done so on Tuesday, but it took several more days of political pressure, most critically from Republicans in the Senate, for members of the House to come around.
Wall Street seemed reasonably optimistic on Thursday, with the Dow Jones Industrial Average up 61.91 points, or 0.51 percent. The S&P 500 and the Nasdaq both gained 0.83 percent.