What's driving economic growth?

Mark Zandi

TEXT OF STORY

Stacey Vanek-Smith: The 800 pound gorilla of economic indicators just came out a few minutes ago -- the Gross Domestic Product. GDP is a measure of all the goods and services this country produces. And the Commerce Department reports the economy grew for the first time in a year in the third quarter -- 3.5 percent. Here to help us help us make sense of it all is economist Mark Zandi with Moody's Economy.com. He joins us live.

Mark Zandi: Good morning, Stacey.

Vanek-Smith: Good Morning, Mark. So 3.5 percent growth. Sounds pretty good. Is the economy on the mend?

Zandi: Yes, I think the great recession is over. And this is proof positive that an economic recovery has finally begun.

Vanek-Smith: Do you expect to see this growth continue? What's driving it?

Zandi: Well a lot of it is being driven by stimulus. I mean I don't think it's any accident the recession ended when the stimulus is providing its maximum economic benefit -- Cash for Clunkers, aid to the housing market. All those things are very key. And a lot of those things will fade as we move into next year. So I think the economy will continue to move forward, but the rate of growth will continue to slow as we move into 2010.

Vanek-Smith: We just, speaking of that, got some kind of disappointing unemployment numbers out for last week. How does that fit into this equation?

Zandi: It's a big part of the equation. The biggest problem for the recovery right now is despite the better GDP, businesses still aren't hiring. And until they start to hire, this recovery we're in won't evolve into a self-sustaining economic expansion. So we need to see those jobless claims start to come down. And in fact we may need a bit more help from the government to make sure that that in fact happens.

Vanek-Smith: What will companies need to start hiring again?

Zandi: Well, I think part of it is credit. A lot of small businesses just can't get credit. Many of them rely on credit cards or small banks. And small banks just aren't lending, and credit-card lenders certainly aren't. And a lot of it is just confidence. Many businesses have been put through the proverbial ringer. They had life-threatening events 6-12 months ago, and it's going to take a little bit of time before they get over that.

Vanek-Smith: Mark Zandi is with Economy.com. Mark, thanks for talking with us.

Zandi: Thanks so much.

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