In its first stab at measuring economic growth for the fourth quarter of 2009, the Bureau of Economic Analysis reported that gross domestic product rose at a seasonally adjusted annual rate of 5.7 percent. The number may not hold up through subsequent revisions -- 3rd quarter GDP growth was revised down twice -- but for now it's what we've got.
Most noticeable: the sound of almost no one cheering. You don't see a 5.7 percent growth rate in the U.S. every day -- the last time the U.S. economy grew that fast was in 2003. But you also don't tend to see such a lack of enthusiasm for good numbers.
The universal explanation for the subdued reaction is that GDP growth in the fourth quarter was driven by a slowdown in inventory liquidation. Earlier this year, businesses were sitting on warehouses full of goods that nobody was buying. So they stopped restocking. They cut so far and so fast that now they have no choice but to begin gearing up again, and that's responsible for more than half of overall growth.
There are some encouraging numbers. Business spending on equipment and software rose rapidly, a point reinforced by strong Windows 7-generated Microsoft earnings. But no one thinks that trend is sustainable unless consumers start buying again, and the evidence for that scenario is mighty thin. Consumer spending rose only 2 percent in the fourth quarter, representing a slowdown from the third quarter's 2.8 percent rise. And what we know about the economy so far this year is hardly encouraging. Judging from weekly jobless claims there hasn't been much improvement in the unemployment situation in January, and the residential housing market appears to be going backward.
The key number, per the Wall Street Journal: "In all of 2009, GDP fell 2.4 percent, the biggest drop for an entire year since 10.9 percent in 1946."
At the close of the worst year for the U.S. economy in more than six decades, Americans are cautious and scared. Without an improvement in the labor situation, they are unlikely to start spending at a rate that can sustain real growth. Congress needs to look inside these GDP numbers, realize how weak they are, and get a jobs bill to the president's desk, immediately.
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