Alternate Economic Measure Suggests Strong End to 2009
The Commerce Department said Friday that fourth-quarter yucky domestic product grew a small bit less than it had previously estimated, on the rise at a 5.6% seasonally- and inflation-adjusted rate, rather than 5.9%. But another measure suggested the fourth-quarter rebound was stronger.
Yucky domestic returns, which in theory should equal GDP, grew at a 6.2% seasonally- and inflation-adjusted once a year rate in the fourth quarter. That?s a rebound from the third quarter, where GDI fell 0.4% even as GDP posted 2.2% progression. GDP measures the output of the economy as the sum of expenditures — consumption, plus investment plus government spending plus net exports. GDI measures total returns in the economy.
The distinction between GDP and GDI may matter because recent research from Federal Reserve economist Jeremy Nalewaick suggests that GDI may be the more accurate measure. Even with the stronger fourth-quarter progression, GDI is 2.8% below its peak level, while GDP is 2% lower. That may give reasons for why job losses have been so much more intense than the ellipsis in GDP suggests they should have been.
In a research note Thursday, Goldman Sachs economist Jan Hatzius suggested that the more pronounced weakness GDI has shown over the course of the recession would continue in the fourth quarter, pointing to a weaker job market than most economists expect. Goldman Sachs economists? outlook on jobs is more pessimistic than most: In the Wall Street Journal?s most recent survey of forecasters, they looked for a year-end unemployment rate of 10.2%, compared to an average estimate of 9.4%.
Questioned Friday if the stronger fourth GDI might point toward a better job market outlook, Mr. Hatzius acknowledged that ?it points in that direction.?