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Gross domestic product
Inflation-adjusted annualized growth in gross domestic product for the fourth quarter of 2013 came in sharply below what the government had estimated last month, the Bureau of Economic Research announced Friday. Instead of 3.2 percent, real (that is, inflation-adjusted) growth was 2.4 percent. That amounts to a $32.7 billion difference. The change is based on more complete information available to the bureau than was the case when it made its first estimate in January. The bureau will issue its final estimate (aside from annual revisions) next month at this time.

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.

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.

The chart below from Doug Short measures the 10-year moving average of growth in real GDP, currently at 1.7 percent.
GDP history
For more analysis and the promised RFK quote, please read below the fold.

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.

Originally posted to Daily Kos Economics on Fri Feb 28, 2014 at 01:08 PM PST.

Also republished by Daily Kos Labor and Daily Kos.

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Comment Preferences

  •  Target's massive losses due to identity theft (4+ / 0-)

    didn't help in that quarter either

    Warning - some snark may be above‽ (-9.50; -7.03)‽ eState4Column5©2013 "I’m not the strapping young Muslim socialist that I used to be" - Barack Obama 04/27/2013 (@eState4Column5).

    by annieli on Fri Feb 28, 2014 at 01:11:08 PM PST

  •  We have to keep our eye on the ball of real (6+ / 0-)

    economic performance as shown by the data, rather than on press releases and media fluff.

    The truth is:  Working people are still hurting.  And Washington is making it worse.

    Cutting food stamps. Cutting military pay and benefits. Reducing benefits to the poor, elderly and infirm continues apace.

    I appreciate the feel-good platitudes coming from some places in Washington, but it is no substitute for a quick and final repudiation of neoliberal economics.

    Trickle-down never did. Voo-doo and still is, regardless of which president practices it.

    "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

    by YucatanMan on Fri Feb 28, 2014 at 01:20:30 PM PST

  •  GDP was always an inadequate measure because (1+ / 0-)
    Recommended by:
    Aunt Pat

    of the reasons you listed, but we have also seen 40 years or more of constant pressure to "tweak" the numbers over and over. Evey administration wants the numbers to look a little better. Every Congressional office wants to "tweak" the numbers for their state or district, just a little. Add in each department that's performance is going to be measured against GDP or whose product is used in the calculations, and on and on, with the result being that the current numbers used have only the most tenuous relationship to reality.

    Important decisions are made using this data and bad data leads to bad decisions.

    We don't know what the real inflation rate is, because we change what we count in order to paint a better picture. We don't know what the real unemployment rate is because nobody wants to report bad news, so we just don't count large numbers of people.

    There is so much vitally important information that we just don't have access to anymore because too many of us want to be shown a pretty picture, regardless of reality.

    "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

    by Greyhound on Fri Feb 28, 2014 at 01:44:45 PM PST

  •  Thankfully (1+ / 0-)
    Recommended by:
    Bronx59

    we can count on climate change to radically increase our domestic GDP as we respond and rebuild to ever larger natural disasters and begin the painful process of relocating whole cities of people from the drought plagued south-west.

  •  As a general rule (3+ / 0-)
    Recommended by:
    kharma, Aunt Pat, lehman scott

    GDP growth is high in developing nations because they are putting their resources and human capital to work.

    GDP growth is low in developed nations because they are sustaining their society within their developed infrastructure.

    Therefore, a 1% growth rate in Switzerland is enough to consider giving all citizens a wage for existing.

    And a 7% growth rate in China is enough to continue building a 21st century infrastructure and a robust middle class.

    Because of the US need to militarize itself and foment resource wars around the world, a 3.5 growth rate is necessary, but not enough prevent its infrastructure from crumbling into dust and preventing one in four children from going to bed hungry every night. This is the GDP of a declining nation.

    •  Here's the same GDP chart for a sustainable (1+ / 0-)
      Recommended by:
      ichibon

      developed nation that can afford to take care of all the people -- Switzerland.

      Compare that with the need for GDP growth in an Imperialist nation -- the US -- that is squandering its blood and treasure on international murder-sprees, diminishing the lives of its people.

  •  the only reason (1+ / 0-)
    Recommended by:
    ichibon

    for this is austerity-the republican plan for economic growth.  none of this comes as a surprise to anyone on the ground level.  increased costs of living, lower wages, and a devalued currency results in, you guessed it, lower demand.  you have to be deaf not to hear the sound of an economy being flushed down the toilet.

  •  Thanks for posting this, MB... (3+ / 0-)
    Recommended by:
    Pluto, Meteor Blades, ichibon

    ...and for the tie in with the alternatives to GDP, especially the GPI.  The era of cheap fossil-fueled economic growth is over and the coming transition to a global steady-state economy is not going to be easy.  150 years of financial and socioeconomic momentum is not going to turn on a dime, but turn it must, and turn it will.  The question is, will it happen via uncontrolled rapid collapse, or a more gradual and perhaps-manageable catabolic powerdown of industrial civilization?  While the latter is certainly preferable, it would require, at a minimum and to begin with, an honest and public recognition on the part of national and global leaders as to the fundamental transformation that is soon to take place.  Can and could that happen?  Call me an unrealistic idealist, but I think so.  The non-sociopathic PTBs are no fools and know that day cannot be postponed forever.  Sooner or later they are going to have to pull out that big silver box from under the table with the big red button on it labeled RESET and try to explain simply to everyone where we're at, what is needed, and what is about to happen.  

    And for anyone who doesn't think they've been working on that box for a long time, here's a part of what's inside.  Take a look at the short versions of the GRI spreadsheets for starters.  They're quite sound new accounting standards, really, and have come a long way since i first saw the initial drafts twenty years ago that they were developing with the help of the Stockholm Environmental Institute.  Good stuff.

    As Nafeez Ahmed put it just a couple of hours ago:  

    The epidemic of global riots is symptomatic of global system failure - a civilisational form that has outlasted its usefulness. We need a new paradigm.

    Unfortunately, simply taking to the streets isn't the answer. What is needed is a meaningful vision for civilisational transition - backed up with people power and ethical consistence.

    It's time that governments, corporations and the public alike woke up to the fact that we are fast entering a new post-carbon era, and that the quicker we adapt to it, the far better our chances of successfully redefining a new form of civilisation - a new form of prosperity - that is capable of living in harmony with the Earth system.

    The article should be mandatory weekend reading for everyone, IMO.

    I have a feeling 2014 is going to prove to be a very interesting year with a lot of really good surprises in store.

    Pessimism of the intellect; optimism of the will. - - Antonio Gramsci

    by lehman scott on Fri Feb 28, 2014 at 04:24:59 PM PST

  •  MAYBE WE SHOULD WORRY ABOUT THE DEFICIT MORE!? (0+ / 0-)

    it fitfully blows, half conceals, half discloses

    by Addison on Fri Feb 28, 2014 at 07:31:01 PM PST

  •  Sequestration (1+ / 0-)
    Recommended by:
    enemy of the people

    The sequester is working exactly as it was intended, screwing with the economy.

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