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Ed Dolan’s Econ Blog US Recovery Strengthens with 3.6 Percent GDP Growth and 7 Percent Unemployment Posted December 7, 2013 Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.

US GDP Growth Rises to
3.6 Percent Rate in Q3 2013  The second estimate from the Bureau of Economic Analysis showed US GDP growing at a 3.6 percent annual rate in the third quarter of 2013  That marked an upward revision from the 2.8 percent advance estimate released last month.  Growth in Q3 2013 was the strongest since the first quarter of 2012 and well above the average for the recovery December 7, 2013 Ed Dolan’s Econ Blog

Phases of the Business Cycle
 According to standard business cycle terminology, the recession phase of the business cycle is the downward movement of GDP from its previous peak  The recovery phase is the upward movement from the trough (low point) of the recession and continues until GDP again reaches its previous peak.  Once GDP moves above its previous peak, the expansion phase begins.  The latest data show that the expansion is continuing. Real GDP is now 5.5 percent above the previous peak December 7, 2013 Ed Dolan’s Econ Blog

Sources of Growth by Sector
 Consumption contributed .96 percentage points to Q3 growth, below average for recent quarters  Investment contributed 2.49 percentage points. Most of the upward revision in GDP growth was due to faster inventory accumulation  Exports grew a bit faster than imports, so the contribution of net exports was positive  The government sector made a small positive contribution to growth, due to more spending at the state and local level. Federal spending decreased. Contribution by sector to the 3.6% GDP growth in Q2 2013 Note: Imports are recorded in the national accounts with a negative sign, so the -0.43 percentage points shown here represent an increase in imports December 7, 2013 Ed Dolan’s Econ Blog

Export Growth Continues after a
Pause  Exports played a leading role in GDP growth during the early part of the recovery  Beginning in Q2 2012, the growth of exports slowed  The data for Q2 and Q3 show renewed strength in the export sector, despite many remaining weaknesses in the global economy December 7, 2013 Ed Dolan’s Econ Blog

State and Local Spending Shows
Signs of Life  Fiscal drag, or decreasing government spending, has been a negative influence on GDP growth for most of the past 3 years  In Q3, state and local government spending showed the first convincing growth for four years  Federal spending continued to decrease as fiscal policy debates in Washington remain deadlocked December 7, 2013 Ed Dolan’s Econ Blog

203,000 New Payroll Jobs in
November  In a separate report, the Bureau of Labor Statistics said that payroll jobs grew by 203,000 in November  September were revised upward  October data, which some thought had been distorted by the government shutdown, were little changed  Manufacturing, construction, transportation, retail, and heath care sectors all showed strong job gains December 7, 2013 Ed Dolan’s Econ Blog

Unemployment Rate Rises Slightly 
The unemployment rate fell to 7.0 percent in November, its lowest level for the recovery  The unemployment rate is the ratio of unemployed persons to the labor force. The labor force increased by 455,000 for the month. The number of employed workers rose by 818,000 and the number of unemployed decreased by 365,000  The unemployment rate is based on a survey of households that is separate from the payroll jobs survey. Unlike the payroll survey, it includes self-employed and farm workers December 7, 2013 Ed Dolan’s Econ Blog

Broad vs. Standard Unemployment Rate
 The BLS also provides a broader measure of job-market stress, U-6  The numerator of U-6 includes  Unemployed persons  Marginally attached persons who would like to work but are not looking because they think there are no jobs, or for personal reasons  Part-time workers who would prefer full-time work but can’t find it  The denominator includes the labor force plus the marginally attached  U-6 fell to 13.2 percent in November, also the lowest for the recovery December 7, 2013 Ed Dolan’s Econ Blog

Involuntary Part-time Work Decreases 
One component of the broad unemployment rate consists of people working part-time “for economic reasons,” popularly known as “involuntary part-time” employment.  This category includes workers who would like full-time work but can’t find it, or whose employers have cut their hours below full time  Involuntary part-time work fell in October, although it remained a bit above its low reached in March December 7, 2013 Ed Dolan’s Econ Blog

Long-term Unemployment Rises  The
recession and slow recovery have been characterized by unusually high levels of long-term unemployment  The percentage of the unemployed out of work for 27 weeks or more rose to 37.3 percent  Both the median and mean duration of unemployment increased December 7, 2013 Ed Dolan’s Econ Blog

The Bottom Line Taken together,
stronger GDP growth, more jobs, and falling unemployment make the United States among the bestperforming of the world’s advanced economies December 7, 2013 Ed Dolan’s Econ Blog

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