Regarding Downward Revised 3Q GDP: 2.8% to 2.2%

Yesterday morning I saw the news on CNBC that 'actual' 3Q GDP has been revised down to 2.2% from 2.8%.


With so much was made of a piddling .2% unemployment drop the other month, what are we to deduce from this huge downward GDP restatement? After all, it's about nearly one-quarter of the prior 2.8% total, and slightly more than 20% of that amount.

That the equities indices rose yesterday, despite this news, is not necessarily remarkable. One day moves don't necessarily produce interpretive results.

But you have to wonder about what this restatement means for the near term US economic growth rate, ex federal spending. After all, this is a 2.2% rate with quite a bit of federal intervention in so many areas of the economy- autos, housing, $787B of fiscal appropriations, nearly-infinitely extended jobless benefits, etc.

Just this morning, before writing this, I happened to see Harvard economics professor Ken Rogoff on CNBC giving some rather gloomy outlooks on the economy going forward. He foresees continuing increases in unemployment, noting that we need to replace 11 million jobs now to regain pre-recession employment levels. He also expects rising foreclosures.

In the midst of such huge federal economic interventions, it's simply difficult to see how anyone can tease economic health out of a single quarter's positive growth rate, especially when it is revised downward so sharply.