01/30/2013 12:03 pm ET Updated Dec 06, 2017

On the Negative GDP Report

Jeez, I knew we were growing too slowly but I didn't think we were contracting. And I still don't -- not in any way that's likely to stick through revisions and incoming data.

Today's GDP report for the last quarter of 2012 had the economy contracting at an annual rate of 0.1 percent, which implies a quarterly rate of -0.02 percent, which implies zero growth. Of the two factors that drove the number down last quarter -- a decline in spending on military equipment and slowing inventory accumulation, both of which sucked over a point from growth-the latter is highly volatile (it's a change of a change) and subject to significant revisions.

So given the volatility of the quarterly data and the fact that the slight contraction is inconsistent with other growth indicators -- housing, employment, consumer spending (the latter of which accelerated in Q4) -- I'd pay more attention to the year-over-year numbers.

Over the year in 2012-q4/q4-real GDP rose 1.5 percent, and over 2012 on average compared to last year, GDP was up 2.2 percent.

Those are not great numbers by a long shot implying growth that's too slow to bring down the still highly elevated unemployment rate. And the role of diminished government spending -- austerity at time when we need a fiscal push -- is a useful reminder that it's not nature that has us stuck in this slog, it's policy. Congress is applying medieval techniques, bleeding the patient while ignoring the indicators both here and abroad as to how that's working.

But I don't think those indicators, at least here in the U.S., just crossed zero.


This post originally appeared at Jared Bernstein's On The Economy blog.