U.S. ‘recovery’ becomes ‘expansion,’ at least in GDP

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With the U.S. economy’s advance in the fourth quarter, some analysts now will be using the term “expansion” to describe future growth instead of “recovery.”

Why? Because the government’s measure of real (inflation-adjusted) gross domestic product was an annualized $13.38 trillion last quarter, finally surpassing the previous high of $13.36 trillion in the fourth quarter of 2007.

So the recession’s losses have been more than made up, at least as real GDP is calculated.

What hasn’t been made up, of course, are the horrendous job losses of 2008-2009. The unemployment rate, now 9.4%, is nearly double the 5.0% rate of December 2007.

How does GDP hit a new high with 14.5 million people jobless? GDP measures the value of the economy’s output of goods and services, not the size of the workforce that it takes to generate that output.

For GDP purposes, output is measured by what is consumed. Despite the high jobless rate, most Americans still are working, and many still are spending money: Total personal consumption expenditures for goods and services came in at a real annualized rate of $9.43 trillion last quarter, compared with $9.34 trillion in the fourth quarter of 2007.

The country also is exporting more. The value of exports was an annualized $1.71 trillion last quarter, up from $1.62 trillion in the same period of 2007.

And total government consumption -- federal, state and local -- has risen (your tax dollars, along with deficit spending, at work). Governments spent at an annualized rate of $2.58 trillion last quarter, versus $2.46 trillion in the fourth period of 2007.

None of this will be much consolation to the unemployed and underemployed. Still, if you’re hoping to eventually find work, news of rising GDP is better than the alternative.

-- Tom Petruno

Chart credit: Northern Trust