3Q GDP

Our prediction that the recession ended in the 2nd quarter was bolstered by yesterday’s GDP data, with its advanced estimate of 3.5% growth. What’s more, GDP is likely to surprise to the upside in coming quarters – there’s even a small chance of seeing a six handle in the quarters ahead. As a result, we expect employment trends to bottom out in 4Q09 or 1Q10. 

This optimism tends to surprise a lot of people, but let’s keep in mind that %GDP is a measure of change, not level. Yes, domestic production is still well below where it was in recent years, and both demographic and policy trends look unfavorable for pure private sector activity. But a steep fall in output induced by a massive credit crunch, followed by a healthy dose of fiscal stimulus and inflation (reflation) of bank reserves, is invariably going to cause a snap back in economic activity. High rates of positive change on much lower levels of output than we saw two to three years ago does not mean that the crisis didn’t happen. But they do indicate a better direction for economic activity.

URLs:

http://symmetrycapital.net/index.php/blog/2009/06/recruiter-confidence-and-economic-outlook/

http://www.bea.gov/newsreleases/national/gdp/2009/pdf/gdp3q09_adv.pdf

http://online.wsj.com/article/BT-CO-20091029-717021.html