Last summer, with market turmoil, a vicious hurricane, and the debt downgrade, it sure seemed like the U.S. was headed back into recession, and soon. The economy had slowed to near stall speed in the first and second quarters, bad news seemed to flow in from all over, and the most reliable progonosticators were forecasting gloom. In late September, Lakshman Achuthan of Economic Cycle Research Institute proclaimed on The Daily Ticker that an economic contraction was unavoidable.
But a funny thing happened on the way to the next recession. Instead of decelerating in the summer and the fall, the economy seems to have accelerated. While Europe muddles its way into stagnation, the U.S. seems to be plowing ahead. The good times are hardly rolling. But as Henry and I discuss in the accompanying segment, the flow of economic data in recent weeks has been almost uniformly positive.
Take the broadest measure: GDP. After growing at a .4 percent annual rate in the first quarter and a 1.3 percent annual rate in the second quarter, the Commerce Department today gave its second answer on third quarter growth: 2.0 percent. That's a downward revision from the previously reported figure, but it still represents a rising pace of growth — not a setting one. Macroeconomic Advisers, which provides real-time estimates of GDP growth, says the economy is growing at a 3.2 percent rate thus far in the fourth quarter.
Macroeconomic Advisers reaches its conclusions by plugging economic data into a baseline model as it comes in. And over the last several weeks, almost every piece of news has been positive — and if not positive, then not exactly negative. On the employment front, 80,000 jobs were added in October and the previous two months' job figures were revised higher. In the three-month period from August through October, the private sector added 367,000 jobs. First-time unemployment claims continue to fall, sliding to 388,000 in the most recent week and hitting their lowest level since April. Industrial production, which fell in September, rose .7 percent in October, and was 3.9 percent higher in October 2011 than it was in October 2010. On the trade front, September exports came in at a record $180.4 billion, and the trade deficit narrowed a bit. Retail sales rose in October, hitting a record $397.7 billion; the three-month total for August-October retail sales was up 7.6 percent from the year-before period. October car sales came in at a healthy clip, up 7. 5 percent from October 2010. Inflation has moderated, with the Consumer Price Index falling .1 percent in October. Even the most tragic and perennially depressed sector of the economy is showing some signs of life. Did you know that housing starts in October were up 16.5 percent from October 2010? And that through the first ten months of 2011, housing starts are actually marginally higher than they were in the first ten months of 2010? The Conference Board's leading economic index, which projects economic activity six to nine months in the future, rose sharply in October.
And all of this is happening without much help from the government. There has been no new stimulus from the Federal Reserve, or from Congress. In the third quarter, declining government spending was a drag on growth. Government employment continues to slump every month.
Of course, plenty can go wrong. A full-on meltdown in Europe is likely to affect the U.S. economy. And the data we have is backward looking and can be revised down. It is entirely possible that when November data on retail sales, employment, and industrial production arrive next month, they will paint a different picture. But if the economy were perched on the edge of recession, if the ill effects of the summer swoon were long-lasting, we would have expected to see it show up in the September and October data. And that hasn't happened yet.
Daniel Gross is economics editor at Yahoo! Finance
Follow him on Twitter @grossdm; email him at firstname.lastname@example.org
His most recent book is Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation