GDP Rose By 2% in 3rd Quarter; Goverment Spending Rises

      Today we saw more better than expected economic numbers.

       "The U.S. economy expanded at a slightly faster 2 percent annual rate from July through September, buoyed by an uptick in consumer spending and a burst of government spending."

       "The U.S. economy expanded at a slightly faster 2 percent annual rate from July through September, buoyed by an uptick in consumer spending and a burst of government spending."

        http://www.cnbc.com/id/49566776

        Of course, with the election only 10 days away, CNBC is editorializing on what this might mean politically:

        "The pickup in gross domestic product may help President Barack Obama's message that the economy is improving."

        "Still, growth remains too weak to rapidly boost hiring. And the 1.74 percent rate for 2012 trails last year's 1.8 percent growth, a point GOP nominee Mitt Romney will emphasize."

 

         I'm not sure why it's necessarily too weak to boost hiring. After all didn't we see unemployment drop markedly recently to 7.8%? Next Friday will be the famous BLS nonfarm payroll report. According to Gallup the unemployment rate is actually now 7.3%. Now I don't know if that's what the BLS report will say next week but Gallup had predicted the fall beneath 8% during September.

 

         As for 1.8 vs. 1.74, that is just quibbling. I mean the difference is not even within the margin for error. Indeed both the 1.8% and the weaker 2nd quarter 1.3% could be revised. So it could be that we've even grown faster than 1.8%. Then again, the 1.8% 2011 number was over a full year, whereas this is just the first 3 quarters-again not necessarily the final numbers either.

 

        As the story over the last 3 years of recovery has been that the 2nd quarter has been a drag, the final number for this year quite possibly be better as the 4th has been a strong period during the recovery. 

 

        Actually, what is notable about the report, is that for the first time in a long time, it's  government spending that picked up the slack:

 

        "Growth was held back by the first drop in exports in more than three years and flat business investment in equipment and software."

         "But the public sector helped pick up the slack."

         "Government consumption and expenditures soared 9.6 percent after decreasing 0.2 percent in the second quarter."

         "Defense spending surged 13 percent after also decreasing 0.2 percent during the previous period."

         "Personal income growth slowed considerably during the third quarter, increasing just 2.7 percent after growing 4 percent in the second quarter. The savings rate also slowed to 3.7 percent from 4 percent."