Friday Economic Snapshot: GDP grows faster than expected
Whether it’s retailers building up their workforces, business owners feeling rosy or a little extra Bailey’s in everyone’s coffee cups, the economy always looks better heading into Christmas. Even so, with surprisingly positive economic data showing improvements in all the big, fundamental categories, the latest round of economic data paints an unusually happy picture as we head into winter.
This week we’ve seen the Q3 GDP revised up to a steamy 3.6 percent, unemployment claims fell 23,000 from the previous week, auto sales continued rising into the stratosphere, the Federal Reserve reported moderate economic expansion across the country and, somewhat oddly, the stock market has retreated throughout the week back below 16,000.
Let’s dig into it.
Gross Domestic Product
In the second quarter of 2013 U.S. GDP increased by 2.5 percent — not bad and in line with the more positive post-recession quarters. For the third quarter of the year that number has increased to 3.6 percent, which shows clear economic expansion that exceeded the expectations of most analysts who were predicting somewhere around 2.8 percent.
According to the Bureau of Economic Analysis, the positive growth reflects contributions from investments in inventory, personal consumption, exports — a surprising bright spot that points to manufacturing growth — and healthier state and local governments. That last point is notable, as reductions in government spending have held the economy back for the last five years.
In its Beige Book report released on Dec. 4, the Federal Reserve pulled data from 12 Federal Reserve Districts that indicated that the economy expanded at a modest to moderate pace from early October through the present. The regions around New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis and Dallas were hottest, with more modest growth in Philadelphia, Chicago, Kansas City and San Francisco.
Digging in further, manufacturing expanded in most districts, with the biggest gains in automobiles and high-tech industries. Manufacturers were optimistic about their near-term growth prospects. Professional business services, computer technologies, freight and tourism also showed improvements in most areas, although the report noted the impact of the government shutdown on tourism during October.
With so many people struggling to find full employment — and all of its impacts on the social safety net and consumption-based spending — this is the indicator to watch in the coming year. As other fundamentals have improved in spurts, unemployment claims have steadily decreased, but not fast enough to move the labor market out of intensive care.
The latest data for the week ending Nov. 30 showed seasonally adjusted initial unemployment claims at 298,000, a significant 23,000 decrease from the previous week. This brings the four-week moving average down to 322,250, 10,750 less than the previous week’s revised average.
According to the report, California, Pennsylvania, Michigan, Illinois and Texas showed the largest increases in unemployment claims, while New Jersey, Florida, Idaho, Mississippi and Virginia showed the largest decreases.
— Tom Kaiser