'Third Quarter Growth' and Other Things That Mean Nothing To You

Good news, everyone: The economic crisis is over!

Kind of. Today's New York Times reports

The United States has emerged from the longest economic contraction since World War II.

The nation's gross domestic product [GDP] expanded at an annual rate of 3.5 percent in the quarter that ended in September, matching its average growth rate of the last 80 years, according to the Commerce Department.

If life still sucks for you: you're still unemployed, depressed, broke, homeless, or scraping by on food stamps, don't worry. You're not alone. In a recent Wall Street Journal/NBC poll, 58 percent of people said they see the country as being on the wrong economic track.

There's always been a weird disconnect between official economic figures like GDP, "third quarter growth," and average citizens' lives. Basically, things can look great on paper, while low and moderate-income people suffer. It's almost like the official record keepers have no idea what life is like for the guy working the graveyard shift in South Side Chicago.

This is not a new problem. Economic indicators like GDP may work swimmingly in lecture hall theories, but they ignore many factors important to the well being of a society, such as health care or life expectancy.

For example, 80 percent of Americans have reported feeling stressed about the economic downturn. The stress affects women the most, who report increases in symptoms like irritability, anger and fatigue. These kinds of economic downturn byproducts have untold consequences on family, workplace, and societal stability.

This stress can also manifest as insomnia. In West Virginia, the AP reports that nearly 1 in 5 West Virginians said they did not get a single good night's sleep in the previous month. For West Virginia, a state that ranks at or near the bottom of the nation in several important measurements of health, including obesity, the insomnia epidemic may have its roots in the economy, says Dr. Ronald Chervin, a University of Michigan sleep disorders expert. Chevin says financial stress and odd-hour work shifts can play roles in sleeplessness.

However, insomnia isn't measured in GDP. This disconnect was large enough to attract the attention of economists like the Nobel laureate Joseph Stiglitz, who is trying to come up with a new, broader definition of prosperity. In an interview with Bloomberg, Stiglitz said:

GDP has increasingly become used as a measure of societal well-being and changes in the structure of the economy and our society have made it an increasingly poor one...So many things that are important to individuals are not included in GDP.

In the model they unveiled, the academics recommend including other factors, such as sustainability and education.

Even the guy who invented the GDP, the late Russian-American economist Simon Kuznets, knew his system had significant shortcomings. He once said, "The welfare of a nation can scarcely be inferred from a measure of national income."

It's true. Fancy lab room words that seemed benign at the time, like "derivatives" and "sub-prime mortgages," had unforeseen, terrible consequences on average citizens' lives. Similarly, the specialized jargon of "GDP" and "third quarter growth" exist on different planets from the rest of us. While the students at the University of Chicago's Department of Economics say one thing, it appears as though the opposite is happening in our backyards -- again.

"The nation's gross domestic product expanded at an annual rate of 3.5 percent in the quarter that ended in September." Fantastic. So what? Does that bring back car-manufacturing jobs from Mexico? Does that mean corporations will now be taxed their fair share?

The official unemployment rate is at a 26-year high, and these statistics don't count people who have been out of work so long that they've given up searching for employment. If we count the "discouraged," as they're so preciously called, it's estimated that 26 million people are out of work.

"The big-picture perspective is that things have improved," said Jan Hatzius, an assistant manager at Wal-Mart.

I'm sorry. I read that wrong. Hatzius is the chief United States economist at Goldman Sachs. I guess things do look pretty sunny over there.

Cross-posted from Allison Kilkenny's blog. Also available on Facebook and Twitter.

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Comments

[itolduso]

The words "you are not alone" brings no comfort....... they make things much worse. They mean that my son, the plumber, cannot expect help from my son, the carpenter, or their brother, the iron-worker.... for they have all lost their jobs. It is a 'failed' nation, when a man with skills cannot earn his way.

[senseandnonsense]

When legislators tinker with the tax system to encourage growth, they should provide incentives to companies to create jobs in the United States. Good jobs. Jobs people can make a living from. In addition, the legislators should tax income earned from manufacturing plants outside the United States at a higher rate than income earned in the United States. Encourage companies to invest in the United States, not elsewhere. When we see job growth, again, good jobs, then a "recovery" means something.
There is no indication that the powers that be understand the economy any better than when they were denying that there was a recession. Ask any small business and the answer comes quicker and surer than from government. "How are collections this month?" "They stink!"

[olephart]

The recent GDP number though hyped by many as evidence of a recovery is just a flash in the pan. Retail sales and improved housing numbers were Government subsidized. Durable goods orders increased as a result of massive military spending. These are all temporary there is no meat on the bone.

The reported deficit at $1.2 trillion is a joke. The real deficit was $1.8 trillion or 13% of GDP. That means 93% of the GDP increase was due to borrowed monies. The Federal Reserve is subsidizing low interest rates by buying $1.25 trillion in mortgages and $300 billion in Government debt. This is done with a printing press. These props are not sustainable and are scheduled to be phased out.

Unemployment is worse than acknowledged. Even U-6 at 17+% does not capture those who have dropped out of the workforce. Indeed the workforce, which normally increases due to demographics by 1.5 million per year, has shrunk by over 2 million this year. Our effective unemployment rate is over 20%.

Real wages have declined by 5% during this recession. Mortgage equity withdrawals are near zero. There is no expansion of consumer spending in the pipeline. Business spending and investment is flat or declining. Private investment, real estate, is flat or declining. That leaves only Government spending to carry the load.

Now the same people who missed seeing the recession coming are saying it’s over. I believe that I’ll get my information somewhere else.

[jhNY]

And extension of unemployment benefits continues to twist slowly in the wind caused by all the hot air emanating from our corporatist lackeys in the US Senate. Yep, there are a good many Democrats who want them extended, but not so much they'll put up much of a fight against the institutional intransigents from the other party. See, if those Democrats fought really hard for them, it would mean that they believe the unemployed really need them, which would be an indictment of Obama's stimulus, which is working so well that within a few days, estimates of the number of jobs created or saved by its effects have leaped from 300,00+ to 600,000! Which is impressive, yet not so many jobs as were lost LAST MONTH.

The overfed can't really appreciate that hunger is a problem, as whenever they feel the eensiest twinge they eat until it goes away. The trough-feeders in Corporatist Town can't believe the country is in terrible trouble, because, heck, all things considered, they're doing pretty well. Obama can't beleive that the financial overclass, which was so right to bankroll his election, could be so wrong about everything else.

[Kassandra]

Not to mention the COLA.....now they won't give it a second thought because things have improved for the very few....so why help out granny? It's an "L" shaped recovery at best.