Government agencies reported US GDP growth at a 3.6 percent in Q3. The economy added 203,000 jobs in November and unemployment fell to 7 percent, a new low for the recovery

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
US Recovery Strengthens with
3.6 Percent GDP Growth and 7
Percent Unemployment
Posted December 7, 2013
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2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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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