New GDP Numbers Will not Be Sufficient To Restore All Financial Harm : NPR

DAVID GREENE, HOST:

There’s information this morning that the U.S. economic system grew at a file tempo in the course of the previous three months. Not many individuals are popping champagne corks, nevertheless. It’s because the economic system additionally shrank at a file tempo within the three months earlier than that. And as sturdy because the rebound was in July, August and September, it was not sufficient to restore the harm performed by the pandemic earlier this spring. NPR’s Scott Horsley is right here to speak us by this. Hello, Scott.

SCOTT HORSLEY, BYLINE: Good morning, David.

GREENE: So what does this morning’s report inform us about how the economic system is doing?

HORSLEY: The GDP report from the Commerce Division reveals the economic system has bounced partway again from the depths of the pandemic recession. The economic system grew about 7 1/2% in the course of the third quarter. That may be a file excessive. And there are some champagne corks popping on the White Home. The president has been touting this as an indication of a very sturdy restoration. He talks much less in regards to the earlier quarter, although, when the economic system suffered a file massive drop of about 9%. The economic system additionally shrank slightly bit within the first three months of the yr, so altogether GDP is about three 1/2% smaller now than it was on the finish of final yr earlier than the pandemic hit.

GREENE: Scott, a few of the headlines popping out are saying 33% development within the quarter. What does that quantity precisely imply?

HORSLEY: That is proper. The federal government routinely reviews these quarterly modifications in GDP as in the event that they have been sustained for a full yr. And that exaggerates each the dimensions of the downturn within the spring and the rebound in the course of the summer time. And each the downturn and the rebound are fairly large to start out with. Within the spring, for instance, the Commerce Division mentioned the economic system shrank at an annualized fee of 31%, that means if the slide had continued for a full yr, we might have wound up with an economic system 31% smaller. Fortunately, that did not occur. The droop was sharp however mercifully brief lived. Likewise, the expansion spurt we noticed early in the summertime just isn’t prone to final. Nariman Behravesh is chief economist at IHS Markit. He calls this a growth and fade, a lot of it ensuing from pent-up demand as companies reopen. However he does not count on it to final.

NARIMAN BEHRAVESH: In case you pull again on a rubber band and let go, it’ll snap again. However then it sort of goes limp again to that. Actually the fourth quarter and possibly early subsequent yr shall be fairly weak development.

HORSLEY: And that is very true as we see a recent surge in coronavirus infections. The inventory market’s reacting to that. That is why you noticed the Dow plunge greater than 900 factors yesterday.

GREENE: You talked about that there is some constructive feeling within the White Home. I imply, not simply because the U.S. economic system may be doing higher however as a result of if in case you have a sitting president, you understand, within the later levels of a push for reelection seeing financial enchancment, that is normally excellent news.

HORSLEY: That is proper. And in reality, again within the springtime, I talked with Jason Furman, who was an financial adviser to former President Obama. He was warning fellow Democrats {that a} rebound like this might give the president a elevate simply earlier than the election. I talked to Furman this week, although, and he was rather less involved about that as a result of quite a lot of the expansion mirrored in at this time’s report really occurred within the late spring and early summer time. And a few of that momentum has since pale.

JASON FURMAN: From a political perspective, it is not simply, are you bettering, however how is the tempo of enchancment? And the tempo of enchancment is slowing. And that I believe makes it much less politically good for President Trump or possibly even politically dangerous for him.

HORSLEY: And we noticed one other signal of that this morning when the Labor Division reported one other three-quarters of 1,000,000 folks making use of for state unemployment advantages simply final week.

GREENE: NPR chief financial correspondent Scott Horsley. Scott, thanks.

HORSLEY: You are welcome.

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