EDITOR NOTE: The GDP headline figure says that the US just pulled-off its greatest-ever GDP jump--an astounding 33.1%! According to this author, never has such a number been both impressive and meaningless at the same time. Break down the numbers, look into the areas of growth, and critically analyze how the numbers were put together--only then will you see what 33.1% growth really means. We’re right where we were during the midst of the Great Recession. Don’t believe it? Read the article and see if you can poke holes in the author’s theory.
America just posted its biggest annualized and single-quarter GDP growth of all time. It isn't that impressive.
The U.S. GDP jumped at a 33.1 percent annualized rate in the third quarter, a growth of 7.4 percent from Q2, Commerce Department records released Thursday reveal. But as Gregory Daco, the chief U.S. economist at Oxford Economics, put it in a tweet, that growth is both "record-breaking and meaningless at the same time."
It's true that the 7.4 percent GDP rise from Q2 to Q3 is a record. But it also comes after a record contraction from Q1 to Q2, and a total loss of 10.3 percent throughout 2020, so it doesn't even come close to making up what was lost amid the pandemic. In fact, the 3.5 percent total GDP shrinkage during 2020 "means we are still down almost as much as we were during the height of the Great Recession," tweets Diane Swonk, chief economist at Grant Thornton.
Economist Justin Wolfers meanwhile debunked the 33.1 percent growth rate the entire Trump family was touting Thursday morning. Looking at annualized growth reveals how much bigger the economy would be if it "grew at this rate for the next three quarters," Wolfers tweeted. "But there's no chance that will happen, so the annualized rate answers a question no one is asking." And if that wasn't convincing enough, Wolfers had another way of looking at it. Kathryn Krawczyk
Originally posted on The Week