NEW YORK (CNNMoney.com) -- The U.S. economy grew at a 3.5% annual rate in the third quarter, ending a string of declines over four quarters that resulted in the most severe slide since the Great Depression. But some economists raised doubts about how long such strong growth can last.

The increase in GDP, reported by the government Thursday morning, was slightly better than expectations. Economists surveyed by Briefing.com had forecast 3.2% growth in gross domestic product, the broadest measure of the nation's economic activity. The economy shrank at a 0.7% rate in the second quarter. - http://money.cnn.com/2009/10/2...conomy/gdp/index.htm



A 9.9% turn-around in 6 months ain't bad.

It is encouraging news, which I hope will have its effect psychologically so that consumer spending and business investment can become the growth norm. Government spending, government employment and debt are more of a mirage; we can all keep up with the "Joneses" if we have lots of credit. Nonetheless, some good things are happening right now and I hope they can be sustained.

Hi Gang:

When our unemployment rate gets down to 4 or 5 % I'll believe we've made a recovery from this recession.

All this crap about a "jobless recovery" is a bunch of Obama B.S.

People without jobs aren't consumers...they only buy enough to keep their family alive.

They don't consume new cars or refrigerators,or washers or any other big ticket items.

They only buy essentials...and that doesn't spell recovery.

hippolips

'A lot of third-quarter growth was the result of temporary government stimulus. Consumer spending grew by 3.4%, the best since early 2007, largely because people were buying new cars in July and August with federal “cash for clunkers”. Sales have since fallen back. Residential construction leapt by 23.4%, the first advance since the end of 2005, helped by an $8,000 tax credit for buyers of new homes. But new-home sales dipped by 3.6% in September, as the deadline to qualify for the credit passed.' A joyless recovery

quote:

All this crap about a "jobless recovery" is a bunch of Obama B.S.

A jobless recovery or jobless growth is a phrase used by economists to describe the recovery from a recession which does not produce strong growth in employment. The phrase originated in the early 1990s in the United States, to describe the economic recovery at the end of President George H.W. Bush's term; it came back into use during the early 2000s.

Prior to the 1990s, most economic recoveries led to employment increases relatively rapidly. However, starting with the 1991 recession the employment recoveries have been historically slow.

Economists are still divided about the causes and cures of a jobless recovery: some argue that increased productivity through automation and robotics has allowed economic growth without reducing unemployment. Other economists suggest that jobless recoveries stem from structural change in the labor market, leading to unemployment as workers change jobs or industries.[1]
[edit] Automation

In the 1960s, The Triple Revolution memorandum suggested that machines would continue to reduce the number of manual laborers needed, while increasing the skill needed to work, thereby producing greater unemployment. This trend would break the rationale for a link between income and jobs which otherwise would tend to limit industrial productivity to what the remaining workers can purchase. More recently, Marshall Brain has suggested in his Robotic Nation essay that a jobless recovery is exactly what you would expect when automation and robots eliminate jobs. To maintain full employment, an economy has to create new jobs to replace the ones that have been automated, but robots and automation can more and more easily fill many of the new jobs that get created, a trend that will only accelerate as robotics and artificial intelligence continue to improve. An economy with rising productivity also has to have rising demand per capita to balance the increased production, but for many things like housing or energy use demand may be limited per capita or may grow more slowly than exponentially rising productivity (driven in part by Moore's law and falling prices for computers and automation). Psychologists have refined ideas like Maslow's hierarchy of needs that suggest increasing material abundance only increases happiness up to a point. So, if productivity rises faster than demand, then one would expect falling prices and increasing unemployment. But without continual innovation, including increasing automation to lower production costs, profits in a market-driven economy will fall to zero through competition, and the profit-driven market place would freeze up. So this problem may be inherent to real economies (as opposed to theoretical ones with infinite demand), with a jobless recovery reflecting essentially a divide by zero error in mainstream economic thinking, with costs trending to zero as productivity greatly exceeds demand. Moving beyond this divide-by-zero error might require some sort of post-scarcity economy.

Outsourcing

Free trade has also been suggested as a possible cause. In this view, during lean times companies are more likely to move factories and jobs offshore to cut costs. These jobs generally don't come back after the economy improves. Offshoring is considered bad for employee morale such that it is done slowly and with caution during times when economics are good because companies do not want to upset employees. However, during a recession, the fear of losing a job keeps employees from leaving, and thus more tolerant of offshoring. - Wikipedia

At least you're consistent, Hippo.

Regardless of how the money started (in this case, by government stimulus, tax breaks, bailouts, etc.), the money got into the economy. It moved. Every job that was saved, however temporarily, by the Cash for Clunkers program meant workers with a paycheck, workers who bought pizzas, went to movies, went to ball games, bought gas, etc. The money moved around from worker to worker. Isn't that the basic definition of an economy? Didn't that moving money create and/or save some other jobs? Didn't the workers in those jobs spend some of their income? Where does that money go to? Who ends up with it? Where would that money be right now if there had been no stimulus, no bailout, no Clunkers program, no tax break for new home buyers? Would it be moving from person to person? What jobs wouldn't exist now had that money not moved? How many housing construction workers would be sitting at home? How many pizza delivery people would be waiting for a call to deliver? How many more jobs just would have simply dried up?

I've read recently that most (70%? 80%? 90%?) of US currency has traces of cocaine on it. Unless there's a cokehead in the Bureau of Engraving, that means that money is moving from person to person. Money moving is the basic sign of an economy.

Regarding jobs, the Obama administration previously reported that 30,000 jobs had been created (about 1% of what was promised). That number would obviously be quite small even if it weren't spin.

Early White House Counts Overstate Number of Jobs Created by Stimulus

Some of the errors found by the AP:

"-- Some recipients of stimulus money used the cash to give existing employees pay raises, but each reported saving dozens of jobs with the money, including one Georgia day care that claimed 129 jobs saved.

-- A Texas contractor whose business kept 22 employees to handle stimulus contracts saw its job count inflated to 88 because the same workers were counted four times.

-- The water department in Palm Beach County, Fla., hired 57 meter readers, customer service representatives and other positions to handle two water projects. But their total job count was incorrectly doubled to 114.

Those errors were included in an early progress report on the stimulus released two weeks ago that featured numerous mistakes, including a Colorado business' claim that its stimulus contract created more than 4,200 jobs. In fact, the actual count was less than 1,000."

quote:

Originally posted by newnickname:
'A lot of third-quarter growth was the result of temporary government stimulus. Consumer spending grew by 3.4%, the best since early 2007, largely because people were buying new cars in July and August with federal “cash for clunkers”. Sales have since fallen back. Residential construction leapt by 23.4%, the first advance since the end of 2005, helped by an $8,000 tax credit for buyers of new homes. But new-home sales dipped by 3.6% in September, as the deadline to qualify for the credit passed.' A joyless recovery

It does matter where the money came from to fund this "recovery". The government can not afford to keep doing what they have been doing and pumping cash like it were "free money" into the economy to keep it afloat.

It must sustain itself by the consumers, and I don't see that happening yet. I hope it happens real soon.

Fuse, I can't give you numbers, but in the greater St. Louis area, dozens of new constructions sites have opened up due to stimulus money, some of them quite large. Surely hundreds, if not thousands, of jobs have opened up here because of this. Those few dozen are just the ones that hit the news, and some of the more local ones that I know about in my town and surrounding area have not made the news.
****
Koz, money doesn't know where it comes from, nor does the secondary or tertiary recipient of those dollars. Does it matter to the oil change guy that the pizza delivery guy paid for his oil change with money he made from the pay he got for delivering to the dry cleaner's house who got the money to pay for the pizza from the construction worker who could finally get his suit cleaned because a new project opened up? That $20 has traveled through 4 people and isn't stopping there. Each step of that twenty's journey has produced a bit of tax money, both sales tax and income tax. Maybe the oil change guy finally has a new roof put on his house. Maybe the roofers hit the local tavern every night on the way home. Maybe the tavern owner hires a waitress. Maybe the waitress has to now pay a sitter. Maybe the sitter blows her pay at the mall. Maybe the stores at the mall have to hire a few more people. Maybe...

The economy gets better when more money moves. How better to "grow" the economy* than to get money into the system? The bush years proved that tax breaks for the rich don't help the economy at the grassroots level. (Not US grassroots, anyway. Maybe the grassroots in India or near a sweatshop in SE Asia. But not the US.)


*It's not a vegetable or a fruit or a crop. You really don't grow it, dammit!


From Wikipedia -

In economics, the multiplier effect or spending multiplier is the idea that an initial amount of spending (usually by the government) leads to increased consumption spending and so results in an increase in national income greater than the initial amount of spending. In other words, an initial change in aggregate demand causes a change in aggregate output for the economy that is a multiple of the initial change.

In congressional testimony given in July 2008, Mark Zandi, chief economist for Moody's Economy.com, provided estimates of the one year multiplier effect for several fiscal policy options. The multipliers showed that increased government spending would have more of a multiplier effect than tax cuts. The most effective policy, a temporary increase in food stamps, had an estimated multiplier of 1.73. Making the Bush tax cuts permanent, had the second lowest multiplier, 0.23. A payroll tax holiday had the largest multiplier for tax cuts, 1.29. Refundable lump-sum tax rebates, the policy used in the Economic Stimulus Act of 2008, had the second largest multiplier for a tax cut, 1.26.

I should also point out that most of the new construction results in better and safer roads, bridges (ones that won't collapse for a while!), resulting in better access to and from large cities, resulting in easier (and safer) travel to locations at which money is usually earned or, more importantly, spent. And that twenty keeps on moving. Compare the hundreds of billions spent on bush's war in Iraq to that. What did we get for our money there?

At the start of WW I, the Chancellor of the Exchequer asked a friend (one of the Rothschilds - Nathan?) how Britain was going to pay for a war. "Tax the wealthy" he was told. "We are the only ones who can afford it!" Rothschild was, at the time one of if not the richest man in the UK. The flip side of that coin is that, if you want the economy to get back on sound footing, you have to put money in the hands of the common man. He is the only one that has to spend it.

I understand that DG, but what people (my fellow commoners ) are doing is not spending their money.

Consumer Spending Down 0.5 Percent in September

Take the CARS program out of the picture and the economic news is not all that good the past quarter.

I am in a decent financial situation. My bride and I both work full time and we have no children. We live well within our means and have no debt. We save a lot of our income. We never took expensive vacations, and my bride always has been the "coupon queen". I do all the maintenance on my vehicles and home. Sorry about the ramble but I am getting to something here.

Last year the large company my bride works (been there 23 years) for had a massive layoff. She survived but for how long no one knows. My (small) company has scaled most hourly workers to 32 hours a week. Some were even less than that. Sales are down, way down. We have been surviving but at a hand to mouth level.

My bride and I have curtailed our spending considerably in the past year and a half or so. We joined Sam's Club to save on things I used to be willing to pay more $$ previously. I now freeze things instead of getting fresh items at my local stores.

For years I have been hoping to do a fairly major renovation in my home. I finally talked my bride into it but I balked and put it on hold a few months ago. I would have done most of the work myself, but I also would have paid a few people to do certain things and of course I would have spent a good amount of money on materials.

That is all money that if we spent would have trickled into the local economy and the tax coffers of my town, county, state and country. I chose not to spend that money because I worry about my bride's financial future.

There are millions more holding onto their money too. Until there in confidence in the economic outlook we will remain to hold onto what we have instead of distributing it.

I really don't know if I am saying this right DG, but in a nutshell I am not going to start spending like I used to for a while I think; and I am far from alone. I like the fact that people who would go into debt for "things" are not doing that so much nowadays, but people like me would rather sit tight and see.

Were the bridge rebuilt in Minneapolis exactly as it was built the first time, it would be in immediate danger of collapse. The structural fault of that bridge was determined to be an undersized gusset plate. I don't know if that is the bridge referred to in this thread.

DG, I hope there are a bunch of construction projects actually going on in your area that are stimulus driven. That would be unusual, however. A "shovel ready" project, to those in construction, is largely undefined but can take a year or more to get going. Land has to be purchased. Permits have to be approved. Surveying, engineering and architectural services must be provided. Projects must be bid. Then you can start.

My understanding is that 15% of the stimulus money has been spent so far. Much of that was in the form of tax cuts, which is where there may be opportunities for help in the economy. I also like the infrastructure spending, to the extent we know where the line is between good maintenance and repair and pork. So I'm not dissing the whole thing. Just the "agenda" and "pork" parts. Which is most of what is left.

A couple that goes out and uses its credit to buy a new car looks like it is doing well. They are simply deeper in debt. And some people, and nations, never learn that lesson.

We have hunkered down where I live. As the Mrs. says, "we are clamping down on expenses" which gets the obligatory "yes ma'am."

There is tremendous activity in the Southwest. I hope it catches on.

Anyone have the broken down figures for consumer spending, etc?

A week or so ago, Patrick Buchanan commented on the McLaughin Report that one of the current problems is that people are saving rather than spending. What he seemingly failed to grasp was that those are people who can save. The average guy can't afford to save right now. He is already in debt and is just paying his bills, or trying to. But by paying those bills, he is injecting money into the economy. When people like this get a job or increase their hours, they generally do not save a little each paycheck, even when possible. Unfortunately, they see that "extra" $20 or so a week as something that they can get a pizza with, go to the movies with, or take the wife out to eat with. Fortunately or unfortunately, it is this lack of frugality of the everyday Joe that will play a big part in restoring the economy. These people didn't buy houses that they couldn't afford; they didn't buy $4+ coffees on the way to work. They didn't "spend" their way to debt on such things. They are people who have lived paycheck to paycheck most of their lives, and for many, their paycheck disappeared because of things far beyond their control.

When I recently posted about the median family income, both Koz and Fuse pointed out that the cost of living in some places is higher than others, and that having a family income of $100,000 doesn't necessarily mean living high. That is certainly true, but then what does having a family income of half that mean? (Remember, most people now live in or very near big cities, and it is in the larger cities that the cost of living is highest. I think it was in the 1930s that America went from mostly a rural population to a mostly urban one.) According to the US Census*, the median household income in 2007 was $52,673. In 2008, it was $52,029. I have no doubt that it is lower now, in 2009, much lower. The average family size is 3.14 persons, making the financial situation even more dire for those with children.** It may be true that two can live as cheaply as one, but three certainly can't.

The US economy is going to improve, but it won't improve via magic with banks and regulations. It's going to improve by getting the average guy to spend money, and there are only two ways to do that; hand him the money or provide him with a job. New rules and regulations for the financial industry will help prevent what just happened, but that is a long term preventative act. Getting people to spend dollars will not only get the economy back on it's feet, but, in the short term (the one in which we all live and eat), even make-work jobs provides those dollars to get things started moving forward and upward again. We have to live (and eat) until the "real" economy comes back.


*http://www.census.gov/hhes/www/income.html

**http://factfinder.census.gov/servlet/SAFFFacts

Kiplinger's Personal Finance used Bureau of Labor Statistics, U.S. Census Bureau statistics, and information from the Martin Prosperity Institute to compile a Cost of Living index for 361 U.S. metropolitan areas, with 100 being the national average. Not counting Alaska (whose citizens get money from the state [Isn't that a bit socialistic? Sorry, Dwight, but I had to say that.]) and Hawaii (whose citizens get to live in Hawaii), the highest is San Jose-Sunnyvale-Santa Clara, CA at 158 (Median Household income $82,664). The lowest on the list is Fort Smith, AR-OK at 83 (Median Household income $35,726). As you can see, Fort Smith's Cost of Living is 52.5% of San Jose's, but their Median Household Income is only 42.3% of San Jose's. Looking at all the cities and numbers, the income discrepancies between the lower ranked cities incomes and the higher ranked is also skewed almost universally the same.


For the record, my area's numbers:

St. Louis, MO-IL
Rank - 87
Median Household Income - $51,713 (insert rolleyes here)

Haven't a whole bunch of folks discovered that they can live on much less, and plow cash into savings and repayment of debt? I've got several stories of that being done in my family alone.

My area's numbers:

Winston-Salem, NC
Cost of Living Index: 90
Median Household Income: $ 45,112

My area's numbers according to Kiplinger.com follow. I don't dispute the numbers but I do feel that are non area specific. Many cities and townships on Long Island (mine included) alone are larger than dozens of cities on that list.

New York-Northern New Jersey-Long Island, NY-NJ-PA

Cost of living index = 121

Median household income = $60,964

Numbers of my township (population of about 150,000 on the North Shore of Long Island) according to the US Census Bureau

Median household income = $80,421 (1999 dollars)

I did not see where it lists cost of living index for my township but I know that it is very high.


The very minute my bride and I are no longer working here on Long Island, (* singing *) North Carolina here I come, do-da, do-da

Problem is, this is a government generated economy we are looking back for the past few short months. The private sector is quite flat.

"Problem is, this is a government generated economy we are looking back for the past few short months."

Does that mean that everyone who gets paid has to give the money back? What if they've already spent it? How about the people "down the line" who received some of that money? Do they have to give it back, too? Will the various municipalities who are getting infrastructure improvements? Do they have to bulldoze the new construction?


"...few short months"

Did I miss the government taking out some days in the 3rd quarter??? Why didn't someone tell me?

Ford Posts Third Quarter 2009 Net Income of $1 Billion; Cash Flow Turns Positive

Reported net income of $997 million, or 29 cents per share, an improvement of $1.2 billion from the third quarter of 2008. Pre-tax operating profit totaled $1.1 billion, an improvement of $3.9 billion from a year ago. It is Ford's first pre-tax operating profit since the first quarter of 2008. - http://www.reuters.com/article...Nov-2009+PRN20091102

On the NBC news tonight, a Ford exec stated that Ford would have been profitable without the Clunkers program.

quote:

Originally posted by DorianGreyed:
On the NBC news tonight, a Ford exec stated that Ford would have been profitable without the Clunkers program.

Ford is a better run organization than GM or Chrysler. They did not need billions of dollars of government money to stay solvent.

Apparently nor did they need the government CARS program either.

See, this is proof that an automobile manufacturer can turn a profit if it is run correctly in this country, even in a poor economy. It also proves CARS was a waste of taxpayer money.

Paying over 20K for each clunker that participated in the program reeks of government wasting money just like GM and Chrysler did.

But the government will show them how to do it, they really know how to waste money

The government should keep it's nose out of the automobile industry and let those who can't run their business go out of business instead of bailing them out with billions and billions of taxpayer dollars.