GDP rebounds in Q3


After dropping -0.7% in Q2 2010 and -6.4% in Q1 2010, the gross domestic product numbers released by the Commerce Department stormed into the black, gaining 3.5%. They’re celebrating on Wall Street, but some question the uptick’s sustainability.

That’s because the numbers for the quarter benefitted greatly from government stimulus programs, and Cash for Clunkers in particular. That and home-buying tax credits helped get consumers to part with some cash, but there are no equivalent programs in place to sustain that kind of spending in Q4 and the job situation remains largely unchanged.

The White House celebrated the news, but also took the news with several grains of salt. Council of Economic Advisers Chair Christina Romer blogged, “After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction. However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered. The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP. And it will take sustained, robust GDP growth to bring the unemployment rate down substantially. Such a decline in unemployment is, of course, what we are all working to achieve.”

RBR-TVBR observation: For US businesses to prosper, they need to get consumers back in the game, and that means more than keeping them on the payroll, it means adding them to the payroll. The denizens of corporate corner offices can feed into the recovery by hiring, or they can strangle it with further cuts. Guess which one we’d like to see.