The Commerce Department reported Friday that the economy posted a 1% drop in Gross Domestic Product for the second quarter (April-June) of 2009. The "consensus expectation" of economic observers had been 1.5%.
That number is only an "advance estimate" based on incomplete data and is likely to be revised in October. Nonetheless, it marks a vast improvement over the first quarter, which saw a fall of 6.4%, revised from the advance estimate of 6.1% issued in late April. Many analysts – both expert and amateur – viewed the news, together with other economic statistics, as more evidence that the economy has bottomed out and is on the verge of posting actual growth in the third or fourth quarter.
While this may be true, and welcome, to be sure, what undeniably is true is that, by numerous measurements, the economy is still getting bad, just at a slower rate. Small comfort for Americans who have lost their jobs, exhausted their unemployment benefits or seen no uptick in consumer spending at their retail shop. The latter situation got worse in the second quarter:
Real personal consumption expenditures decreased 1.2 percent in the second quarter, in contrast to an increase of 0.6 percent in the first. Durable goods decreased 7.1 percent, in contrast to an increase of 3.9 percent. Nondurable goods decreased 2.5 percent, in contrast to an increase of 1.9 percent.
Had it not been for the administration’s American Recovery and Reinvestment Act rejected by most Republicans when it was passed last February, the results would have been grim indeed. Josh Bivens at the Economic Policy Institute wrote in More than 500 days of recession that, without the stimulus legislation, the decrease in GDP for the second quarter would have been as high as 4%. So, whatever its putative limitations, the ARRA is accomplishing at least part of its mission: cushioning the pain. Those 3 percentage points work out to about 720,000 saved jobs. In other words, without the stimulus, the second-quarter loss of 1.3 million jobs would have been half again as bad.
Bivens says:
In short, the recovery act turned this quarter’s economic performance from disastrous to merely bad. This is no small achievement, but with even more public relief and investments, the U.S. economy could do much better.
Even with the Keynesian-inspired boost, the drop in GDP was the worst year-over-year performance since data started being collected in 1947, as shown in this graphic from EPI:
Just another in the seemingly endless series of worst-on-record statistics we've seen crop up in the Great Recession, from length of time spent unemployed to the number of people supplementing their grocery-buying with Food Stamps.
Yesterday also saw the release of the Bureau of Economic Analysis’s revision of economic figures all the way back to 1929. The key finding relevant to our times, as gjohnsit has pointed out: The economy’s plunge in 2008 was far worse than previously calculated. You may recall Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke predicting all the way through July a year ago that growth would merely slow but the U.S. would not fall into recession, and there would be no major bank failures. In May, Paulson said:: "The worst is likely to be behind us,"
The statistics then seemed to bear them out. The third quarter 2008 drop in GDP was a comparatively modest 0.5 percent. What really happened? According to the BEA revision, it plunged 2.7%.
With job growth wiped out all the way back to 2000, with even the best outcome adding at least another 300,000 unemployed to the official rolls when next week’s figures are released, with unemployment benefits being exhausted, with unemployment-related foreclosures now competing with those related to subprime mortgages, with consumer confidence and consumer spending down, and with all but the most optimistic agreeing that a recovery will likely be feeble, it’s clear that for millions of the Americans, the worst is yet to come.
And that is just by traditional economic measurements. As diarist mwmwm wrote in The End of the Beginning of the Collapse on Monday, we are on the precipice of "converging emergencies," the cusp of a huge, Nature-coerced restructuring that pays us back for ignoring for so long that economy and environment are not two separable entities but inextricably intertwined. Recognizing that means traditional measures of economic well-being simply don’t cut it anymore.
We clever humans may manage to figure a way to deal with these convergences. We may turn crisis into opportunity and emerge scarred but irrevocably enlightened about how things actually operate in a finite world, determined to live within its boundaries for the sake of all who come after us. We are, after all, adaptive. First, however, enough of our leaders and enough of us citizens have to get it. Will they? Will we?