GDP posts a modest gain – but still not strong enough to tighten the labor market. Also look at the revision in Q4 from last year.
Even with boost from stimulus, economy just limps along
by EPI economist L. Josh Bivens
U.S. gross domestic product (GDP) grew at a 1.9% annual rate in the second quarter of 2008, following growth of 0.9% in the first quarter of the year, according to a Commerce Department report released today.
While positive growth obviously is better than negative, the underlying trends in the working-age population and productivity mean that GDP growth of less than 2.5% is a recipe for job-loss, rising unemployment, and falling wages. For example, the 0.9% growth rate of the first quarter of this year was accompanied by the loss of 247,000 jobs, and the second quarter’s 1.9% growth was accompanied by a loss of another 191,000. Furthermore, wage growth for non-supervisory workers (80% of the private sector workforce) has lagged inflation in five of the first six months of this year.
Today’s report also included revisions to GDP going back three years, based on more complete source data. These revisions show that GDP actually shrank in the last quarter of 2007 (falling at a 0.2% annual rate). If anybody was taking comfort in the fact that quarterly GDP reports had yet to show negative growth, that solace is now gone.