{"id":2220,"date":"2010-10-29T10:56:46","date_gmt":"2010-10-29T14:56:46","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2220"},"modified":"2018-08-17T14:01:52","modified_gmt":"2018-08-17T18:01:52","slug":"third-quarter-2010-us-gdp","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/10\/29\/third-quarter-2010-us-gdp\/","title":{"rendered":"Third Quarter 2010 U.S. GDP"},"content":{"rendered":"

This morning the results\u00a0of the first pass at estimating gross domestic product for the third quarter just ended were released.\u00a0 The U.S. economy grew 2.0% according to the Commerce Department.\u00a0 This compares to a consensus expectation of 2.1% by economists.<\/span><\/p>\n

For reference the second quarter GDP is now estimated to have been up 1.7%.<\/span><\/p>\n

Analysis:<\/strong> As a former professional investment manager<\/a> I can tell you that one of the miserable aspects of the job is that your performance is measured objectively, not subjectively.\u00a0 At the end of the day it doesn’t matter whether or not you are a nice person, thorough in your analysis, or great at calculus.\u00a0 No, what matters is whether or not you made money for somebody.\u00a0 Well growth in “gross domestic product” is the same.\u00a0 It doesn’t matter the political spin-doctoring, the intention of the Federal Reserve, the actions of businesses and business leaders, etc.\u00a0 What matters is how fast did the damned thing grow!<\/span><\/p>\n

The number is 2.0% for the third quarter.\u00a0 Economists and business writers are going to call this\u00a0anemic growth.\u00a0 But honestly I don’t consider this growth to be that.\u00a0 Why?\u00a0 Certainly 2.0% growth is far less than the “economic” growth reported during the BOOM times.\u00a0 But then that “boom” was more an explosion than a sonic boom.\u00a0 That boom was created by monetary policy so loose that brothel employees blushed.\u00a0 In other words, it wasn’t real economic growth<\/a>.<\/span><\/p>\n

As I have said many times before, real economic growth is finding better ways of doing something so that the same result is achieved with less resources.\u00a0 Alternatively, real economic growth is creating something new that never existed before that is true innovation.\u00a0 (See the Best of the Blog section if you want a full discussion of this topic.)\u00a0 Right now productivity in the United States is running at about 2.0% as well.\u00a0 So wouldn’t you expect economic growth to be about the same, too?\u00a0 I do.<\/span><\/p>\n

However, and this is a BIG however, economic growth is not high enough to lead businesses to creating new jobs<\/strong>.\u00a0 And there’s the rub.\u00a0 But then if you read this blog regularly you know that I have been predicting a long, slow climb out of this economic pit that we all dug for ourselves.\u00a0 The good news is that the economy has grown enough in the past year – the official end of the recession – that we are almost back to the same level of economic output we were as the recession was beginning.\u00a0 It just doesn’t feel that way…because of the unemployment mostly.<\/span><\/p>\n

But lo (!) there is good news in the data.\u00a0 Let’s drill down to the most significant part of today’s news…<\/span><\/p>\n

Consumer spending was up 2.6%.\u00a0 That figure compares to up 2.2%\u00a0in the second quarter, and up 1.9% in the first quarter.\u00a0 Can you see that consumer spending is accelerating?\u00a0 In fact consumer spending is almost back up to the magic 3.0% level.\u00a0 That level is magical because on average the U.S. economy historically has grown around 3.0%.\u00a0 Consumer spending makes up 70% of economic growth on average.\u00a0 The other portions of economic growth are: investments by business, government spending, exports, less imports.\u00a0 So for GDP to be up 2.0% in the third quarter, yet consumer spending to be up 2.6%, means that consumers are doing more than their fair share of contribution.\u00a0 What that means to me is that the “game of chicken” I have been describing for what seems like forever, is nearing a close.<\/span><\/p>\n

Consumers are starting to spend at a rate faster than overall economic growth.\u00a0 If that continues for even just one more quarter, businesses are going to have to start to increase wages and salaries, and maybe even hire new employees.\u00a0 That’s because as the economy grows the excess capacity that has existed for awhile will disappear.\u00a0 Eventually businesses will get to the point where they cannot service their customers because their is too much business relative to their ability to fulfill.\u00a0 That results in hiring.<\/span><\/p>\n

Lastly, I am very excited by the fact that not only is consumer spending growing, but the rate of change is accelerating, too.\u00a0 In calculus, that’s the second derivative.\u00a0 And right now the second derivative is positive.\u00a0 That is a very good thing.\u00a0 We also finally have three pertinent data points to evaluate.\u00a0 And it looks good.<\/span><\/p>\n

Importance grade:<\/strong>10; gross domestic product, gdp, is the grand pappy of all economic numbers.\u00a0 It is the net result of everything that everyone in the economy does.\u00a0 For the third quarter everyone’s choices and actions led to an increase in the economy of up 2.0%.\u00a0 While less than everyone would like.\u00a0 It is a sane<\/strong>figure.\u00a0 There is no irrational exuberance in the figure.\u00a0 There is no irrational doom-saying in the figure.\u00a0 Just the hangover like effects of having drunk at the monetary elixir spigot for a decade.\u00a0 Hangovers are good.\u00a0 They tell people: Next time drink in moderation.<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

This morning the results\u00a0of the first pass at estimating gross domestic product for the third quarter just ended were released.\u00a0 The U.S. economy grew 2.0% according to the Commerce Department.\u00a0 This compares to a consensus expectation of 2.1% by economists. For reference the second quarter GDP is now estimated to have been up 1.7%. Analysis: […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2220","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2220"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2220\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}