Krugman on today's revision of Q3 GDP from 3.5% to 2.8%

[Kurt_and_Hunter]

Paul Krugman November 24, 2009, 9:00 am

Second estimate of third-quarter GDP out; growth rate marked down to 2.8%.

This is really quite grim. At this growth rate it’s far from clear that we’re doing anything to reduce the output gap — the gap between what the economy could produce and what it’s actually producing. Correspondingly, there’s no reason now for even a bit of optimism on unemployment.

When the 3.5% advance number came out, I took to warning people that even if the economy continued to grow at that rate, we wouldn’t see anything like full employment until late in Sarah Palin’s second term. Given the latest number, the date at which we can expect to see a return to full employment is … never.

And that’s if growth continues at this rate. The odds are good that growth will slow down next year: the stimulus has already had its peak effect on growth and will turn into a net drag in the second half, the inventory bounce — which was a major factor in 3rd quarter growth, such as it was — will fade out.

Basically, we may be in a technical recovery, but we’re not recovering.

http://krugman.blogs.nytimes.com/2009/11/24/gee-thats-de-pressing/

Commerce Dept. GDP press release: http://www.bea.gov/newsreleases/national/gdp/2009/pdf/gdp3q09_2nd.pdf

Geez... we are getting into perfect storm territory. The recovery is almost entirely a product of federal deficit spending and Fed super-loose money but a completely wrong-headed conventional wisdom is solidifying around the propositions that the deficit and potential inflation are our "real" problems. Herbert-fucking-Hoover here we come.

Krugman catch from a different blog entry today: While the "serious people" talk about inflation and a "bond bubble" Bill Gross of Pimco has increased his fund’s holdings of US-government-related debt from 48 percent in September to 63 percent now. But hey, what does one of the most successful bond investors in history know?

[high density]

1. Of course full employment isn't returning

The corporations do not want to pay the wages to employ us. We're going to continue to fail until there is a fundamental realization from companies that we can't have a consumer economy when consumers have no good jobs to earn a living. Everybody is focused on the current quarter when long term earnings are trending fast to zero.

[rapturedbyrobots]

6. we are literally useless

to the globalized consumer economy. india and china have emerging 'middle' classes with numbers that hugely eclipse anything that the american consumer economy could ever even dream to be. the corporations don't care if we can buy their crap because for each of us there are 10 asians who can. this country is quite literally screwed. there is absolutely no incentive for transnational corporations to ever bring jobs back to the u.s.

[fasttense]

8. In about 50 years China and maybe India will be able to consume

as much as the US did back in 2007. But right now, neither country can amass enough of a middle class to buy the crap they ship here. If these countries have a burgeoning middle class to buy up what they make, why aren't they doing it right now? Why are they still sending their junk to Wal-Mart in the US?

It's a fallacy that China will anytime soon be able to equal, let alone out pace, our US consumer market. Their average income is in the thousands not tens of thousands as it is in the US.

No, the corporations have managed to destroy the biggest consumer market in the history of the world. It's all just going to get worse and worse in America. We will slowly decline until we look like a third world country.

[rapturedbyrobots]

9. 50 years?

that's really funny. have you been to asia lately? i was there 3 months ago. go every year. and things are changing FAST. it'll take one generation. that's it. the groundwork is being laid now.

[WI_DEM]

2. It's time to get health care done so the president and congress can

concentrate on growth and jobs.

[AllentownJake]

3. Krugman is making people unhappy this morning

[Kurt_and_Hunter]

4. Has Courtney Love gotten fed up with Joe the Plumber?

[Rosa Luxemburg]

5. maybe we should try to increase exports

[DCBob]

7. Hold the "sky-is-falling" rhetoric... This just means the recovery will be very very very slow...

and we likely will never return totally to where we were before. America peaked economically a few years ago due to the bogus housing bubble and minus another new bubble, we wont get back to those levels ever again. Unfortunately that's the harsh reality.

[Kurt_and_Hunter]

10. For Democrats that does constitute the sky falling

The problem is that in a two party nation the inevitable decline in national standard of living you describe will be accompanied by oppression, censorship, diminished reproductive choice, greater ruthless government power and, in all likelihood, nuclear war eventually.

The US is not going to turn into something out of ROAD WARRIOR but if the people are less than philosophical about their necessary decline in standard of living it will turn into G. W. Bush parts three, four and five.

[DCBob]

11. Wow, nuclear war?? Just because our standard of living may decline a bit??

I see your general point but that's a bit extreme. I guess it depends on how much and how quickly our SOL declines. I don't think it will be all that noticeable and shocking since it likely will be a slow, gradual effect over years and decades. IMO.

[Kurt_and_Hunter]

13. Referring to one sided nuclear war (Iran)

The pugs are itching to try out our tactical bunker busting nukes.

[uponit7771]

12. Yeap, jobs are low hanging fruit that aren't being focused ENOUGH upon,