Real GDP increased 1.9 percent in 2013 compared with an increase of 2.8 percent in 2012, the bureau said.
As the Robert F. Kennedy quote below the fold states so perfectly, gross domestic product is a flawed measure of our well-being. But it's the most complete single aggregate measure we have of the overall economy. Viewing the trends and looking at the details offers us a somewhat fuzzy snapshot of what's going on. It doesn't tell us how good our jobs are or gauge important matters such as income inequality. And it has other drawbacks, too.
But even the best efforts to replace it have only created measures that provide good information on some things that GDP does not, but contain their own flaws and miss some things GDP measures well. As Zachary Karabell wrote recently at The Atlantic:
GDP treats all output as a positive. When you buy LED lights that obviate the need to spend on incandescent bulbs and reduce energy consumption, GDP goes down and what should be an unmitigated good becomes a statistical negative. If a coal company pollutes a river, the cleanup costs are positive for GDP, as are any health care costs for those harmed.The chart below from Doug Short measures the 10-year moving average of growth in real GDP, currently at 1.7 percent.
What’s more, we have also come to assume that with output comes more spending and employment, but factories today are powered by robotics and software, and robots don’t buy more lattes and shoes.
GDP is a good number for a nation that produces lots of stuff made by lots of workers, but for an information economy grounded in services and intellectual property and awash in apps that cost nothing yet enable commerce, it is not up to the task. Nor are many of our indicators.
Those caveats aside, the government's second estimate of GDP growth for the fourth quarter was disappointing to everyone who viewed growth in the last half of last year as an indicator the economy was finally on the verge of taking off from the tepid recovery, most of whose benefits have flowed to the topmost tier of Americans. Although the government's third estimate in March could alter the estimate in the opposite direction of the estimate released today, there are numerous signs—including a housing slowdown—pointing to weaker growth in the first half of 2014.
One of those signs in the past two months has been the recent job reports of the Bureau of Labor Statistics. Next Friday, the bureau will release its job numbers for February. The BLS report has its own limitations, including the fact that it fails to take into account large numbers of people who have left the work force, thus skewing the real economic situation. While retiring baby boomers make up a portion of these leavers, a large percentage are people in their prime earning years, 25 to 54.
A single job report must be viewed very cautiously, but trends revealed by the BLS are valuable. And an unfortunate trend may be building. In the past two months, job growth has clocked in at an average of 94,000. If the numbers for February are in the same vicinity (and the previous reports aren't revised significantly higher, a frequent occurrence), then forecasters who had until recently been saying that 2014 was going to be the year the economy really gets back into gear are going to be introduced to downshifting.
As noted above, because of the flaws in the way it measures economic activity, it's important to use the GDP in conjunction with other economic factors when measuring the economy's health. Robert F. Kennedy's assessment in 1968 still resonates:
"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans."Inadequacies in the GDP gauge have spurred efforts to develop a better measure or supplements to it. These include France's Commission on the Measurement of Economic Performance and Social Progress, Canada's Genuine Progress Index (a version of which has recently been tried out in Maryland), the Human Development Index and the Gini coefficient.