2nd Quarter of 2009: Economy Shrank Faster Than Estimated

The economy shrank faster in the second quarter of 2009 (April, May and June) that originally estimated. The Bureau of Economic Affairs originally estimated that the US economy contracted by 0.7% in the second quarter. You might recall the Obama administration crowing about the smaller contraction (compared to the 6.4% contraction in the first quarter of 2009). Most likely a Republican administration would have crowed too, but a smaller contraction, while not as bad as a larger contraction obviously, means we're still in a recession.

As it turns out, the BEA now estimates that the economy actually contracted slightly more in the second quarter than initially estimated--by a full percentage point. Many economists predicted that the third quarter, which ended on September 30, will bring a 3% growth rate in the economy, which would be nice indeed after an already-severe recession. I suspect, however, that if we see any growth in the third quarter it will fall short of the 3% prediction. I wouldn't feel surprised to see continued contraction either. Keep your fingers crossed.

It will be interesting too, to see if one quarter of growth will lead the National Bureau of Economic Research, a private organization started by anti-market economist Wesley C. Mitchell, which declares the beginning and end of recessions, to declare the end of this one. In the past the NBER has always defined a recession as two consecutive quarters of contraction in the economy. By that measure the recession didn't start until late in 2008, a year after the Fed started its vain Keynesian attempt to prevent a recession by inflating the money supply. Suddenly, however the NBER changed it definition of a recession to something rather vague so that it could claim the recession actually started in 2007! I suspect that they made the change to make the Bush administration look worse. Will the NBER revert to the economic growth definition again to say it's over despite growing unemployment, in order to make the Obama administration look better, or will they stick to their new definition (whatever that might be) and wait until the employment picture improves? Stay tuned... :-)

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm