Political impact of surprisingly weak 3Q GDP
First, the Commerce Department:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of2009, (that is, from the second quarter to the third quarter), according to the “third” estimatereleased by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent. The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.8 percent.
Me: And, of course, the original estimate was 3.5 percent. Now a few thoughts;
1) After such a nasty recession, the US economy should grow in the 6-8 percent range. The first seven quarters after the 1981-82 recession saw 7 percent average GDP growth.
2) If that doesn’t happen soon, another sign that this recovery/expansion will different. And by different, I mean weaker than is typical.
3) And a weaker recovery, means weaker job growth. To drop unemployment by a full percentage point next year, it will take 4 percetn GDP growth generating 250k a month.
4) High unemployment and weaker growth means a higher level of danger for Democrat incumbents in the 2010 midterms. My working model translates 3 percent growth into typical losses of 25 seats in the House, 2 in the Senate. If growth comes in at closer to 2 percent, that is when you get the 1994-esque scenario with 40+ losses and 5+ Senate seats.