GDP contracted from last quarter

A Banana Republic customer looks at her receipt as she leaves a store in San Francisco

TEXT OF STORY

SCOTT JAGOW: This is where we are. The economic news has gotten so bad that even a scrap of something positive is a reason to rejoice.

The government says GDP contracted at a rate of about four percent last quarter. That is serious economic shrinking. It was only half a percent in the third quarter. And many quarters before that, the economy was growing. But -- not to sound cliche -- things could have been worse.

Here's Marketplace's Steve Henn.


In the last 3 months of 2008 the American economy put in its worst performance in more than 25 years. The Gross Domestic Product fell dramatically. But not quite as much as the five percent many analysts were betting on.

MARK ZANDI: Down 3.8 percent and that's better than expected. That's just astounding and highlights the severity of the situation that we are in.

Mark Zandi's at Moody's Economy.com. He says the biggest reason that the economy didn't shrink even faster is that businesses inventories have been growing. In this economy that's a red flag.

ZANDI: All we did was shift the pain.

Here's how that shift works. Consumer good aren't selling, so they're piling up on store shelves and car lots and warehouses. That means many businesses will have to cut production and layoff more worker. So Zandi says we haven't hit bottom yet. Employers laid off more than 2.5 million Americans last year. And economist expect the unemployment to continue to climb.

In Washington I'm Steve Henn for Marketplace.

About the author

Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.

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