And the point about that is this: we tend to obsess about whether the economy is growing (good) or shrinking (bad). But clearly, contracting at 0.1 percent last quarter, as in the initial GDP report, is hardly different than growing at 0.1 percent, as in today's revision. Crossing zero is a lot less important than growing fast enough to create enough demand to actually nudge down the unemployment rate.
For that, you have to grow above trend and trend is probably a bit north of 2 percent right now. That's considerably higher 0.1 percent, of course, but as I noted when this report first came out, we're probably doing better than that. The quarterly numbers are volatile so I like to look at year-over-year; by that measure, GDP is up 1.6 percent over the past year. Add in the sequester and other headwinds I worry about here, and it's hard to envision much progress on jobs, wages, and most people's incomes in the near term.
Once again, and much like the jobs' reports that keep showing the loss of state and local employment, the GDP report shows that contractionary fiscal policy, which shows up as less government spending, has been pretty relentlessly whacking away at real GDP growth since the Recovery Act faded out. The figure shows the government sectors' -- fed, state, and local -- contribution to real GDP growth. In the most recent quarter, that impact was particularly large, subtracting 1.4 percentage points off of growth.
That's a warning...and I'm Cassandra.
This post originally appeared at Jared Bernstein's On The Economy blog.