Growth cheery, but economy glum
A disconnect: Pocketbook well-being has fallen behind productivity gains.
A gulf has opened up between the economy that Americans are experiencing and the one portrayed in the broadest measure of US production: the gross domestic product.Skip to next paragraph
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According to the GDP, the economy is growing – most recently at a 3.3 percent annual pace in the second quarter. Important indicators other than the GDP, though, are walking and quacking like a recession.
Among them: eight straight months of job losses; declining industrial production; a housing market so weak the government was forced into a mortgage market bailout on Sunday; automakers seeking a federal rescue of their own, perhaps up to $50 billion
Why the disconnect?
It may reflect a new reality characterized by mild economic cycles but also by pocketbook well-being that isn't keeping pace with economic productivity gains.
Many economists are saying it's a recession despite the GDP numbers and forecasting a difficult economic climate well into next year.
"It's quite clear that we are in a recession," says Asha Bangalore, an economist at the Northern Trust Co. in Chicago. "I don't know why we're taking so long to use the word…. I don't think we need to see an official announcement."
To some extent, the word choice is academic.
And on Tuesday, Rep. Rahm Emanuel of Illinois said he and fellow Democrats in Congress will push for a second economic stimulus package this year – this one possibly including an expansion of food stamps and aid to cash-strapped local governments.
It's not just here in Michigan, with its struggling carmakers and nation-leading unemployment rate, where the economy is the top concern.
In a nationwide CNN poll in June, 75 percent of Americans said the nation is in a recession. And last Friday, the national unemployment rate registered a jump to 6.1 percent, the highest in five years.
Yet a popular definition of recession has long been two quarters of declining GDP, something that hasn't happened yet. The only down quarter lately has been the small 0.2 percent decline in the final quarter of 2007.
The official call on a recession is made by a panel of economists, known as the business-cycle dating committee, at the private National Bureau of Economic Research in Cambridge, Mass. They consider a range of data, from job creation to retail sales and industrial production. Yet GDP remains an important part of the calculation. Making things complicated for anyone who wants to know, the panel generally makes its call after the fact, or near the end of a recession, after weighing the revisions that periodically happen to government data.
Why did GDP look so good in the second quarter?
One reason is the temporary boost of an economic stimulus package, enacted earlier this year by Congress and President Bush, which sent tax-rebate checks to millions of families.
But the biggest factor, economists say, was the impact of international trade. A rise in exports helped GDP but didn't necessarily help lots of US workers.