Jobs may not be coming back, but the GDP is.
The first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.
Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.
Growth was boosted a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.
But what do some economists say?
JOHN SILVIA, CHIEF ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA: “The overall number came in as we had expected and the real story is final sales, which continue to be positive. The final sales is a reflection on consumer spending, which is good to see, and business investment and software equipment and the federal government. We do have sustained economic growth and it is not a “V” recovery. The economy continues to improve, but we do not have an economic boom here. This implies the Fed will be on hold and is consistent with the Fed’s minutes. The Fed must be pleased with the economic growth and the inflation number remains pretty low, which is important. For an economist, this is a good report… This shows the economy is healing and doing okay.”
ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE CORP, BOSTON: “It is surprisingly strong. It seemed like people were downgrading what they thought it was going to be as the week went on, and then all of a sudden this is way on the outside edge of any kind of range of consensus. I have to take a look at it but I suspect it has to do with less of a drawdown of some inventories and maybe some trade, but this is certainly very surprising. I’m not sure what this does for the Fed, but since this is the advanced report it is subject to some pretty significant downgrades as they get real numbers on both exports and inventories. I doubt it will stay this high once they revise it twice.”
BORIS SCHLOSSBERG, DIRECTOR FOR CURRENCY RESEARCH, GLOBAL FOREX TRADING, NEW YORK: “Wow, it’s a big headline. Net-net it is a positive report and we are seeing a spike up in many markets. But after the initial impact, one has to rethink this number and note that some underlying drivers to growth are still underperforming. Most of the jump in the headline GDP figure came from a rebuild in inventories, which is to be expected.”
So is it shocking? No, but it’s definitely better than expected, and in the black art that is economics, this is a good sign.
But why hasn’t employment picked backed up? Because, as many of you know, employment has always been a lagging indicator anyway. Companies are always gun shy about hiring people that they may need to let go soon after. But with news like this my guess is that employers will start adding staff. They don’t want to get caught unprepared when things finally do turn around.
More as it develops…