I don't buy for one second that the path to Democratic victory in 2010 is to bewail the state of the economy -- an economy that will have been under their charge for nearly two years. Rather, the path to victory is to turn that economy, and the jobs picture around.
This morning's report that the economy grew in the Third Quarter at a rate of 3.5% -- the most in over two years -- is a remarkable turnaround, is unabashed and unapologetic good news, and is a direct result of the work of Democrats that were elected in 2006 and 2008. Democrats can and should take proud ownership of that number, and it deserves cheers not dismissals on this blog.
In case anybody needed a reminder of the purpose of this blog:
This is a Democratic blog, a partisan blog.... It's a Democratic blog with one goal in mind: electoral victory. And since we haven't gotten any of that from the current crew, we're one more thing: a reform blog.
This morning, the Bureau of Economic Analysis announced that GDP grew at the annual rate of 3.5% in the 3rd Quarter, after spending most of the last year of Bush’s term in office free-falling into the worst fincancial and economic disaster since the Great Depression. And yet, only 8 months into the Obama Administration took office, only half a year after the Democrats in the House and Senate with virtually no GOP support whatsoever passed a huge economic stimulus bill, the economy actually grew.
And that the economy grew following the enactment of that Democratic stimulus plan was no accident of statistics. According to the Council of Economic Advisor’s report on the impact of the stimulus:
estimates of the impact of the ARRA on GDP and employment. ...
These estimates suggest that the ARRA added two to three percentage points to real GDP growth in the second quarter and three to four percentage points to growth in the third quarter.
This implies that much of the moderation of the decline in GDP growth in the second quarter and the anticipated rise in the third quarter is directly attributable to the ARRA
It isn’t just that: while the Chair of the CEA, Christina Romer, has noted that
"Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009," and that "By mid-2010, fiscal stimulus will likely be contributing little to growth;" she has also
cited estimates that in the third quarter of this year, the economy would have had 1 million fewer jobs without the stimulus. Some $195 billion of the stimulus has been spent through the end of that quarter, she said.
The impact on jobs doesn’t follow precisely the pattern of the impact on GDP. Economists see the stimulus contribution to GDP as greatest in the third quarter (Romer estimates a 2.7 percent upward bump). But the impact on jobs will be greatest next year, according to past estimates by Romer’s team.
If you don’t want to accept the White House’s advisors' words for it, then how about Bloomberg business news:
The economy in the U.S. probably grew in the third quarter at the fastest pace in two years as government stimulus helped bring an end to the worst recession since the 1930s, economists said before reports this week.
In other words, without the Democratic stimulus – almost unanimously opposed by the GOP troglodytes, the economy would have continued to free-fall in the second quarter, and would still be declining vigorously now. Instead the economy is growing.
The positive impact of the Democratic stimulus plan on GDP and jobs is no accident. In one of his last diaries on this site, When Will the Jobs Return, Bonddad pointed out the historical link between GDP and jobs:
[L]et's look at history to see when we should start to expect a drop in the unemployment rate. Below are three graphs that coordinate two data sets: the year over year percentage change in GDP and the unemployment rate. Each chart is broken down into smaller, more easily understood components -- the first is the late 40s to the end of the 1950s, the second is from 1960 to 1980 and the third is from 1980 to 2000.
All of these charts tell the same story: until we see a year over year increase in GDP we're not going to see a drop in the unemployment rate. The intuitive reason is pretty simple: businesses need to see a solid reason to hire employees. That solid reason is a growing economy. So, business needs to see a growing economy before they start to hire people.
To cut to the chase, no GDP growth = no jobs. GDP growth, especially GDP growth of 2% or more year-over-year = jobs. Here's the graph I've previously published demonstrating that point (I'll update with todays' data shortly if possible):
We need at least one more quarter of equal or better growth than we just had from July through September, before jobs will likely be added.
In that regard, the other bit of news this morning by the BLS, that there were 530,000 new jobless claims last week, marks the fifth week in a row that such claims have finally decreased under 550,000, and the second week that the more reliable 4 week moving average is at ~530,000, in other words, about 20% less than the peak of 658,000 new claims 7 months ago -- the level at which (if it can be sustained another month or two) in past recessions and recoveries, new jobs have begun to be added.
In other words, not only has the stimulus helped turn around GDP, but it’s most potent effect on job growth is still in the future.
Yes, it’s true that job growth hasn’t arrived yet, and there is a long, tough road aheard of us. It will probably be a number of years before we regain all the jobs we have lost in the last two years, BUT ... Rescuing the economy from free-fall, turning it around into growth, and laying the groundwork for job growth next year: that’s an accomplishment Democrats can and should be proud of, and proclaim at the top of their lungs.
UPDATE: The improvements in the economy were broad-based, especially in the leading indicator of personal consumption expendtiures. Here's Bonddad’s take from his blog, in part:
yes, cash for clunkers was a big reason for the increase. But there were other contributors as well.
Real personal consumption expenditures increased 3.4 percent in the third quarter, in contrast to a decrease of 0.9 percent in the second. Durable goods increased 22.3 percent, in contrast to a decrease of 5.6 percent. The third-quarter increase largely reflected motor vehicle purchases under the Consumer
Assistance to Recycle and Save Act of 2009 (popularly called, "Cash for Clunkers" Program). Nondurable goods increased 2.0 percent in the third quarter, in contrast to a decrease of 1.9 percent in the second. Services increased 1.2 percent, compared with an increase of 0.2 percent
Yes the cash for clunkers program was a big goose. But notice it wasn't just durable goods that saw increases: non-durable goods and services also increased. And not by small amounts. Also note the durable goods purchases by consumers only comprise 12% of PCEs. Services are by far the biggest component of PCEs, coming in at 65.7%. And non-durable goods comprise 21.9% of purchases. That makes the 1.2% increase in services and 2% increase in non-durables very important. The increase was broad-based.