Cautious Optimism

This morning’s Bureau of Economic Analysis (BEA) report suggested that the downturn has slowed. They showed a 1% decrease in GDP in the second quarter of 2009. Compared with a drop of 6.4% in the first quarter of this year, and a drop of 5.4% in the fourth quarter of last year, this decrease signals (maybe) some good news in the upcoming months.

Interesting in the report was a decrease of residential investment of 9% from the preceding quarter (annualized). This is an improvement over the 36.4% decrease in the first quarter of this year. Domestic private investment overall decreased by only 20.4%, as opposed to the halving (a 50.5% decrease) we saw in Q1.

Here’s the front page of the online version of the WSJ.


Some other good news from the Department of Labor yesterday: The four-week average of jobless claims fell by 8,250 to 559,000, the lowest level since January 24.

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2 comments for “Cautious Optimism

  1. Han
    August 7, 2009 at 2:40 pm

    So glad to see some positive numbers in today’s gloomy economy. However, are these numbers real? Or it is just a “political strategy” to lift up our spirits? I don’t mean to doubt the news, but job losses, foreclosures, profit/revenue drops… are still everywhere around me :(

  2. Arnav
    August 7, 2009 at 3:47 pm

    firstly, the gdp is just less negative, but it’s still negative (i.e., shrinking) nevertheless. hopefully, in this quarter we’ll see a turnaround.

    also, there is always a lag between any improvement in productivity and unemployment. if business is improving firms will first try and maximize their utilization of current employees, then they’ll go to the labor market to hire some more.

    usually it’s 12-18 months after things start improving that one sees unemployment starting to decrease.

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