Daily Forecast Update: GDP and Weekly Jobless Benefit Claims

October 29, 2009

By Jed Smith, Managing Director, Quantitative Research

Good news: The economy seems to be emerging from the recession. GDP is the broadest measure of economic activity, and the trend is up.
Unfortunately the economic recovery continues to be weaker than expected, as indicated by the employment data. However, inflationary pressures are minimal and interest rates continue to be low.
Bad news: The economic recovery is not yet reducing the unemployment rate; in fact, there is a possibility that the rate may increase slightly before job creation occurs.
Accordingly, for the approximately 90 percent of consumers with a job, now is a good time to recognize that interest rates, lower housing prices, and an increasingly favorable economic environment may make a home purchase appropriate if needed.

The Commerce Department announced today that real GDP rose at an Annual rate of 3.5 percent in the third quarter of 2009.
The GDP increase was higher than the 3.3 percent increase previously predicted by many economists.
Economists noted that the growth was facilitated by government stimulus programs, including Cash for Clunkers and tax credits for first-time home buyers.
The increase reflected positive contributions from personal consumption expenditures, exports, private inventory investment, federal government spending, and residential investment.
There continues to be concern over rising unemployment and weak consumer spending.
Some commentators have questioned whether continued tight credit and weakened consumer balance sheets will slow GDP growth in subsequent quarters.

First-time weekly jobless benefit claims dropped by 1,000 last week to a seasonally adjusted 530,000.
Economists had predicted a drop to 521,000 initial claims, so the results were worse than expected.
The four-week moving average, seasonally adjusted, for initial claims was 526,250 for the week ending October 24, down by 6,000 for the previous week.
Although the economy is expanding, job creation is lagging, as has happened in recent recessions.

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