The GOP is prancing about with glee at the latest GDP numbers, which showed surprisingly strong growth
U.S. gross domestic product surged at a 7.2 percent annual rate in the July-September period, the Commerce Department said. It was the steepest climb since the first quarter of 1984 and more than double the second quarter's 3.3 percent rate
Sounds great, huh? Except that (and those same GOoPers won't mention this) we are still losing
Even as the recovery quickened in the third quarter, a net 41,000 non-farm jobs were lost, bringing the number of job losses since President Bush took office to 2.6 million.
So the economy is growing, but job prospects continue to lag. As economist Brad Delong notes
, something will have to give.
How can such strong output growth coexist with such lousy employment news? It is this year's great economic data mystery. Everyone believes that it cannot last. Either (i) firms will find themselves unable to meet rapidly-growing demand with their current labor force, and will start hiring at a furious pace, rapidly expanding employment; or (ii) households will take a look at their less-than-certain employment prospects, cut back on spending, and the pace of demand growth will slow drastically.
Current forecasts are smack in the middle: predictions of output growth at an annual rate of between 3.5% and 4.0% per year over the next year and a half or so, coupled with employment growth of perhaps 125,000 a month on average--enough to keep the unemployment rate from rising, but not enough to make unemployment fall.
However, the longer the disjunction between fast output growth and stagnant employment continues, the less likely this smack-in-the-middle forecast becomes. Things are very likely to be either significantly better or significantly worse than the current consensus forecast--but we have no idea which.
Runaway defense spending likely had a role in the strong GDP numbers, and I'm interested in seeing exactly how big that role might be.