The Good and Bad of the US Economy's Light GDP Dip
The Atlantic's Marc Ambinder wrote earlier this month that the most important number in politics would be released today, July 31, 2009. It is the first estimate at economic growth from April through June of 2009. If the numbers were good -- ie, "positive or only very slightly negative" -- he thought it would put wind in the sails of health care reform.
Well, today is July 31. The GDP numbers are out. And they are...
"Good!" That is, they are only slightly negative. GDP dropped one percent, which was better than expectations, and much higher than the previous quarters, as you can see from this New York Times graph to the right. The bright side for Democrats is that they can point to today's report as a signal for flat or positive growth through the rest of the year.
Even though this report points to positive growth before the end of the year, it marks the first time since 1947 that we've seen four consecutive quarters of negative growth. Economic growth in the first three months of 2009 took an historic free fall, collapsing 6 percent -- the worst quarter in three decades. This quarter it beat analyst estimates that GDP would contract by 1.5 percent.
There's more bad news to go along with the "good" news. Consumer spending also fell by 1.2 percent, and there are concerns that consumer spending, which has grown to be about 70 percent of the economy, will continue to lag as people continue to save and pay down their debts. And there are few signs that unemployment, which is scratching the 10 percent mark, will begin to fall in the next few months.
We're beginning to see a consensus that even when the economy begins to recover, it won't feel like a recovery.
Update: My colleague Megan beat me with her own analysis of the GDP drop, in haiku-ish form. It's shorter, more poetic, and essentially says the same thing. Read it here.