Friday, January 29th, 2010

The 2009 GDP? It's the Worst Since 1946–And 7.6 Million Jobs Disappeared in Two Years

NUMBERS!We're going to talk about math and finance here, so take a deep breath. I'll go slow for you! The big headline today is that, from 2009's third quarter to the fourth quarter, the gross domestic product increased at an annualized rate of 5.7%. This sounds really big! So many big headlines about it. But may we put it in perspective? One of the short versions is that people had more cash, and spent more, in the final three months of the year, that they did in the previous three months. So when the Times trumpets that the "U.S. Economy Grew at Fastest Pace in 6 Years Last Quarter," what they mean is that, in six whole years, this is the largest quarter over quarter contrast. Is this shocking? Actually it is because the previous quarter was kind of garbage. Let us instead compare to years previous. The government says: "GDP decreased 2.4 percent in 2009 (that is, from the 2008 annual level to the 2009 annual level), in contrast to an increase of 0.4 percent in 2008." So, you know, another way to headline this announcement would be something like: "U.S. Economy Ended 2009 Only 2.4% Worse Than 2008." Here's how Bloomberg expressed that idea: "For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946."

More than 200,000 (non-farm) jobs disappeared in the last quarter of 2009 alone. They haven't announced the official 2009 job loss numbers yet, but we can estimate.

216,000 in August. 53,000 in September. 190,000 in October. And so December ended the year with an unchanged official unemployment rate of 10%, or 15.3 million people. Two years ago? We ended 2007 with 7.7 million officially unemployed people, with an unemployment rate of 5%.

So yes, math tells us that official unemployment double in two years. And that doesn't count millions of people like yours truly, who are no longer employed but cannot collect unemployment.

You see, I think, how these ahistorical, quarter-over-quarter press releases that get trumpeted on the front pages in this fashion have actually no relation to the real numbers in any kind of actual context.

Here's the absolutely most interesting part of today's government release, from the very bottom. Let's read it real slow, together!

Current-dollar GDP decreased 1.3 percent, or $182.7 billion, in 2009. Current-dollar GDP increased 2.6 percent, or $363.8 billion, in 2008.

During 2009 (that is, measured from the fourth quarter of 2008 to the fourth quarter 2009), real GDP increased 0.1 percent.

That means that the last quarter of 2009 was just a tiny, smidge bit better than the also-sad fourth quarter of 2008. And you know what this means? It means that year over year, in 2009 nothing good happened at all.

When you look at the real numbers, here's what you have. (When they say "real," they mean "measures as expressed as index numbers" with 2005, as a reference point, equal to 100.)

The Real Gross Domestic Product 2005: 100
The Real Gross Domestic Product 2007: 104.872
The Real Gross Domestic Product 2008: 105.331
The Real Gross Domestic Product 2009: 102.772

27 Comments / Post A Comment

dado (#102)

You can prove anything with statistics. 82% of the people I've talked to know this. Yes, I stole this from Homer Simpson.

sigerson (#179)

I don't want to "mansplain" here, Choire, but you're wrong. The headline is that the economy has turned the corner and the recession is over. That's the news.

Yes, we haven't climbed back out of the hole that 2007 – 2Q 2009 dug us into, but the trajectory is upward. There were green shoots all over the map in the third quarter and now the fundamentals of the economy are making massive moves in a positive direction. Hell, even the housing market appears to have bottomed out last summer.

Jobs are a lagging indicator, so we won't be back at 7.7 million unemployed on an absolute level for some time. But the business community (including this site) is making plans to buy inventory, expand markets, introduce new products and, some day, hire more workers.

Yes! The quarter over quarter growth is really something! That is true.

It MAY mean that we have turned a corner. However, what the quarter means is that there was lots of government spending, and a growth in overall personal income and spending–and ALSO, something people don't talk about much, a downturn in imports.

I don't think this proves that we have turned the corner, however. We might have!

katiebakes (#32)

I'm most worried about all the debt maturing in the next few years.

HiredGoons (#603)

'We' being investment bankers.

badthings (#1,903)

Also, doesn't "real" mean inflation-adjusted?

(It's not mansplaning if your voice rises at the end).

And I know I'm something of a minority opinion here? But I don't think that these instances of improvement–some of which is just difference, not improvement ("National defense decreased 3.5 percent, in contrast to an increase of 8.4 percent" (quarter to quarter)).

La Cieca (#1,110)

I think it's adorable the way your voice goes up at the end of a sentence?

I think a lot of this is actually just the stimulus money finally starting to work its way into the economy. The stupidity behind the GOP refrain of "the stimulus didn't work" was that the vast majority of the money had barely started to be disbursed.

Matsfro (#2,778)

And I'd like to know where you saw that the housing market bottomed out last summer? Everything I'm reading still indicates that while house purchases may have increased, foreclosures are still at an all time high and property value continues to decrease.

All in all this was a great write up to remind us to take these figures that are jammed down our throats, like some fix-all vitamin, with a grain of salt.

sigerson (#179)


Case-Shiller's latest:

Full disclosure: I bought a house in April 2009 for less than the 2003 price. So, I'm obviously biased on housing given that I really really want there to have been a bottom in housing prices last year. That said, the inventory is clearing everywhere at an increasing rate, which suggests that prices have come down in line with demand.

It's possible. The real problem is that we don't know how much inventory is going to flood into the market in the near future, because potential inventory is so closely tied to the (very shaky) economy. What's out there now is selling because prices are objectively pretty good in a lot of places, but if foreclosures (and non-foreclosure sellers motivated by job loss, etc.) continue to pour inventory into the market, you ain't seen bottom yet.

Still, your April 2009 purchase was a good move. Not knowing the specifics, I'd still say that you didn't buy anywhere near the top half of the price spread, even including the continuing downward trend you'll see in the next year.

KarenUhOh (#19)

It's still pretty much funny money with occasional flashes of discretionary spending in the consumer sector ("Yay! I didn't get fired!! I'll BUY that damn necklace the wife was admiring!")–but, yeah, a ton of government ("The only spender": Robert Reich) dough.

Problem is, there's very little real wealth.

So this trumpeting, it is coming from a kazoo, no? Or Tim Geitner blowing into his elbow.

Yes on the funny money / "very little real wealth," and I'll add: the real value of this news is how it makes people feel, because in an economy as neurotic as the one we've got, perception has an even greater impact than normal. Also, animal spirits.

HiredGoons (#603)

This space already provides such sustenance. This space is so floaty. Don't you feel it too? Don't you feel less weight?

We are pain-free here. Join my spirit animal network.

sweetpickles (#812)

The politicians and finance wizards can throw all the numbers out there they want. The truth is we don't have a good solution for job creation. We are going to be mired in this shit for a while. Large swaths of the economy have been replaced and/or wiped out and aren't coming back.

Matt (#26)

Uh: "(non-farm) jobs," talk about burying the lede.

Ribs (#2,690)

non-farm jobs always gettin' stuck in my maw. GOD IS THERE A PUBLICATION OUT THERE THAT CATERS TO FARM JOBS PRIMARILY?

Baboleen (#1,430)

If we don't start manuafacturing goods to service then the "growth" can't sustain itself.

bpharis (#3,236)

The growth is an illusion – one time project jobs – some are stimulus jobs which only last for 12 months or less.

Until we get ahold of the budget and federal deficit – we are in spriral downword spin – an economy based on debt – value of our dollar based on treasury notes owne by China – were is there any hint of a balanced budget – retiring the debt – building fixed assets.

A nation based on debt and a never ending promisory note –

save your money now – before there isn't anymore

HiredGoons (#603)

To quote Christopher Walken in 'Batman Returns':

"It's a mild swelling"

And frankly it I'm going to go out on a limb here and say that the growth doesn't represent a truly solid economic foundation, ie: manufacturing.

I'm going to venture to guess a bunch of people at the top got richer.

This was hard, fuck you for making me think about math and economics on a post-Sake Friday morning.

OuackMallard (#774)

Or to quote Howard Beale in 'Network':

"We know things are bad–worse than bad. They're crazy."

HiredGoons (#603)

That's just bananas.

bong hitler (#3,233)

So real GDP increased 2.772 per cent since 2005. That's a good thing. Too bad the national debt will soon consume the entire universe. That and the impending invasion of starving polar bears.

Publius Cato (#3,222)

We can use the polar bear army to conquer other countries and use their resources to pay off the national debt. Two birds, one stone!!!

bpharis (#3,236)

We can definitely feel we are destined to be consumed by debt – lifting the federal debt ceiling to almost $2 trillion! If we follow our government's budget practices we will all be indebted to point of collapse, and we don't have China to purchase our debt.

So in your personal life – don't live by debt, mortgages, and car notes – live savings, cash on hand, cash in the bank – for once I agree cash is king……that is while there is still a little value to the dollar

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Publius Cato (#3,222)

Fuck cash, invest in hard assets, like lead and gun powder and if you a really means capable a good hydroponic system.

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