Real GDP grew at a faster pace than previously estimated during the third quarter, the Bureau of Economic Analysis reported today.
The quarter’s real GDP was 1.8 percent larger than in the same quarter of 2012. The BEA had previously estimated year-on-year growth at 1.6 percent.
Third quarter real GDP was 0.9 percent larger than in the second quarter. On an annual basis, that amounts to a 3.6 percent growth rate, quarter-on-quarter. If growth continues at this rate, it will be a significant increase and should help to decrease unemployment.
At the same time, increased economic growth likely will lead the Federal Reserve to scale back its quantitative easing monetary stimulus sooner as well.
Household debt increased $127 billion in the third quarter of 2013 to $11.3 trillion. Total household debt had reached a post-recession low in the second quarter after rising to a high of 12.7 trillion in the third quarter of 2008, during the depths of the Great Recession.
The recent increase was due to several factors. Mortgage debt increased by $56 billion, student loan debt increased by $33 billion, and auto loan debt increased by $31 billion. Home equity, credit card, and other debt changed only slightly.
On the one hand, the 1.1 percent increase in household debt can be seen as a sign that consumers are gaining confidence in a slowly-improving economy. At the same time, households need to ensure they are not borrowing too much and repeating the excesses that led to the housing bubble and financial crisis.
The federal budget deficit resumed its decline in October, with the 12-month moving average falling $2.4 billion to $54.3 billion, its lowest level since November 2008.
The federal budget deficit or surplus varies considerably from month to month, so taking the average of the previous 12 months gives a more useful picture. There actually was a budget surplus of $75.1 billion in September and a deficit of $91.6 billion in October. The 12-month moving average peaked at $123.1 billion in February 2010, and has trended downward since as the economy slowly recovered.
The budget deficit soared in 2008 and 2009 as government tax receipts dropped and the federal government undertook aggressive fiscal stimulus to lessen the severity of the Great Recession.
Consumer confidence decreased to 79.7 in September, from a revised level of 81.8 in August, the Conference Board reported today. Consumer confidence has been trending downward since reaching a post-recession high of 82.1 in June.
The latest state unemployment report was a mixed bag, with 18 states plus DC showing rate increases, 17 states showing decreases, and 15 showing no change in August.
Nevada still has the highest rate, at 9.5 percent, and Illinois was second with 9.2 percent. North Dakota still has the lowest rate, at 3.0 percent. All told, 15 states had rates significantly lower than the average rate of 7.3 percent, and 11 states plus DC had higher rates.
Producer prices for finished goods were unchanged from June to July, the Bureau of Labor Statistics reported today. This followed an increase of 0.8 percent from May to June.
July producer prices were 2.1 percent above year-earlier levels.
The unemployment rate fell to 7.4 percent in July from 7.6 percent in June, and for the right reasons. The number of people with jobs increased by 227,000, while the number of people unemployed decreased by 263,000.
Even so, the employment rate, the percentage of the population aged 16 and over with jobs, remained stuck at 58.7, pretty much where it’s been since the start of 2010. Part of reason for this is demographics. As baby boomers reach retirement age, they leave the labor force. While the population increased by 204,000, the number not in the labor force increased by 240,000.
However, part of the reason also is continued weakness in the economy and the feebleness of the recovery. In order to create enough jobs to put unemployed people back to work, the economy needs to be growing at rate of 3 percent or more. Instead, growth rates have been in the 1 to 2 percent range in 4 of the last 5 quarters.
Congress hasn’t been helping things. By cutting spending while the economy is still weak, they are simply prolonging the pain and exacerbating employment problems. Even if one believes that the public debt is a serious concern, the time to address that is when the economy is strong, not when unemployment is above 7 percent.
Initial claims for unemployment insurance plunged to their lowest level since January 2008, falling 19,000 to 326,000 in the week ending July 27.
Initial claims haven’t been this low since the week ending January 19, 2008, when they were 318,000.
The less-volatile 4-week moving average also remains close to its lowest level in more than 5 years, falling 4,500 to 341,500.
Unemployment insurance claims are a completely independent measure from the official unemployment rate. However, the two are closely related. Unemployment insurance claims are compiled from state data, and are mostly associated with layoffs.
The official unemployment rate is determined by the Bureau of Labor Statistics surveying 60,000 households each month. Layoffs are an important determinant, but the official unemployment rate also is influenced by hires, quits, and people entering and leaving the labor force.
The median home price fell 5.0 percent from May to June, to $249,700. However, the median price still was 7.4 percent above the June 2012 level. The month-over-month price decrease, the second in a row, could simply be the result of lower priced homes coming on the market.
June new home sales were up 8.3 percent versus May, to a seasonally-adjusted annual rate of 497,000. June sales were 38 percent higher than in June 2012.