For the first time in quite a while, consumers got something better than a rock after they knocked at the door of our economic scorekeepers. Gross domestic product (GDP) grew at 2.5 percent in the third quarter of 2011 - a big jump from the 0.9 percent in the first half of the year. It's all because consumers are spending, but that may not last for very long because the data also show we're frightened about what lies ahead.
The single largest component of GDP comes from Americans opening up their pocketbooks to buy goods and services. Such household spending growth rates more than tripled to 2.4 percent in the third quarter. What is shocking, however, is that consumer confidence continues to plunge, suggesting that a single quarter's growth is not enough to convince Americans that things have returned to normal. Rightly so, because 2.5 percent growth, even if it persists, is not going to be enough to generate the job growth needed to replace the millions of jobs that disappeared in the past few years.
The Bloomberg Consumer Confidence Index fell to minus 51.1 for the week ending Oct. 23. Ninety-five percent of those surveyed viewed the economy negatively, the highest that figure has been since April 2009. One quarter of barely acceptable growth does not a recovery make.
New jobless claims dipped slightly, but remained stubbornly above the 400,000 mark. The number of Americans collecting unemployment benefits fell, but the government is still writing 3.65 million checks to people who aren't working. The unemployment rate hasn't budged from 9.1 percent, and it won't without more significant economic expansion.
As much as President Obama would like to claim credit for the touch of good news, external factors played a significant role. The resolution of supply chain disruption from the natural disasters in Japan and moderation in oil prices have helped. Labor productivity and international trade also grew, with exports increasing at an annual rate of 4 percent.
The continued lack of new jobs and the housing market doldrums largely explain why consumers remain skittish. They see their homes, the major asset for most families, decline in value. Regrettably, subsidizing underwater mortgages, as Mr. Obama plans to do, will not help resolve the problems created by a housing bubble largely created by similar political manipulation of the marketplace.
There will be no job growth until the private sector receives the "all clear" to begin hiring. There are signs that some major regulatory impediments may be swept away, including the possibility that the Supreme Court will hear the case on Obamacare as early as next month. That would resolve one of the biggest concerns businesses have, according to surveys of chief executive officers. Exports should grow even more with the three new free-trade agreements signed.
Ultimately, the lack of confidence in the economy stems from the lack of confidence in Washington, not in the strength of Americans at work. Dispensing with the class warfare rhetoric and allowing businesses to expand and hire is the only chance we have to escape this malaise.
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