An economist roundtable on the GDP

Marketplace Staff Oct 29, 2009
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An economist roundtable on the GDP

Marketplace Staff Oct 29, 2009
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Kai Ryssdal: All right, now that you know the how’s and the why’s of gross domestic product, maybe we ought to look at the what-for’s of today’s report. The ABC’s of it, if you will. Imagine for me in your mind a graph. A chart of the progress of the American economy. The big question now is what letter-shape the line on that chart is going to resemble. ‘Cause the best way to understand economics, of course, is to keep it simple.

David Wyss is the chief economist at Standard and Poors.

DAVID WYSS: I don’t think it’s going to be a W-shaped recession. That doesn’t mean you’re going to keep up 3.5 percent growth, though. I think growth is going to revert to more 1.5 to 2 percent after this quarter.

That is, no double-dip recession, Wyss says. There’ll be some ups and downs but the trend will overall be positive. Even when you take into account the huge amounts of government spending that helped nudge today’s number up above three percent.

WYSS: Half the growth in the 3rd quarter came from cars.

That’d be Cash for Clunkers. Great, economically, while it lasted. But that’s not going to be in the numbers next time ’round. It looks like the homebuyer tax credit might be. And I asked David Wyss about money from the stimulus package. All the billions in infrastructure projects and the like that has yet to be spent.

WYSS: I think we’ll start seeing more of them in the fourth quarter. But the problem is you’re going into the winter. And you don’t do a lot of highway construction during the winter in the northern U.S.

No you don’t. There’s something else to think about, too, as recovery starts to become more real. All the money the government has borrowed to save the banks and keep the economy afloat, even though the numbers are so big it seems like play money sometimes.

Economist Ken Goldstein at the Conference Board says the debts are very real.

KEN GOLDSTEIN: You don’t need a PhD in economics to figure out that somebody is going to have to pay that money back and that somebody is the American taxpayer. Not now, but once the economy does finally get back on its feet. You know, the American taxpayer, you and me, are going to get hit with a bill to pay for all this.

To some degree recessions are all about how we feel about ’em. Consumer confidence is still down in the dumps someplace, and even if this recession’s not truly W-shaped. Goldstein’s worried consumers might think it is.

GOLDSTEIN: If the economy slows down, either in the fourth or first quarter, to let’s say 1 percent or even less than 1 percent, it’s going to be so slow out there that it’s still going to feel like we’re back in the recession.

And that’s for the people who have jobs. Remember, the unemployment rate traditionally tells us where the economy’s been, not where it’s going.

Tim Quinlan’s an economist at Wells Fargo.

TIM QUINLAN: We’ll probably see employers start adding to payroll sometime in the second half of 2010. But that won’t translate into a drop in the unemployment rate until very late in next year. So between now and then the headlines will still talk about rising unemployment, regardless of how the consumer is spending, and even if businesses pick up spending, ultimately the job market needs to recover in order for any kind of lasting recovery to form.

So all of that said, once you get past the deficit and the unemployment and what letter this recovery may or may not look like, what does today’s report really mean? The best thing we heard on that all day was this from economist Margaret Simms at The Urban Institute.

MARGARET SIMMS: Well, umm, I think that uh, we have to say it means something, but it doesn’t mean things will get better right away. It’s a sign of hope you might say, not a sign that your reality is going to change in the short term.

Three-and-a-half percent growth is great on the face of it. Better, in fact, than the historical average for the American economy. But as we all know, there’s nothing average at all about the 2009 version of that economy.

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