GDP Numbers Come Out Friday

I predicted that we would have a Q4 09 “bump.” But so did everyone else.  I think we’ll have a positive Q1 10 also. The latest report from Goldman Sachs reveals that they have upped their Q4 estimate to 5.8%:

We have boosted our estimate for fourth quarter growth to 5.8% from 4.0% (annual rate). However, about two-thirds of this growth represents a sudden stabilization inventories after sharp declines earlier in the year. Final sales appear to have risen at only about a 2% annual rate with little sign of improvement judging from the latest data on hiring, retail sales, and housing demand.

They go on to say about 2010:

1. Recovery in 2010 is apt to be slow after a large, inventory-driven, fourth-quarter surge. The 5.8% annualized increase we now estimate for real GDP in the fourth quarter would boost the average growth rate for the second half of 2009 to 4%. We reckon that fiscal stimulus (including its multiplier effects) and inventory stabilization accounted for all of this growth, on balance; by the second half of 2010 these supports will have dissipated. Meanwhile, the US economy faces several structural headwinds. Among them: (a) efforts by households to boost saving out of current income, aggravated by (b) weakness in labor income, reflecting the impact of high unemployment on wages and employers? reluctance to rehire aggressively, (c) fiscal drag from the state and local, (d) large overhangs of vacant homes and unused industrial capacity, which limit the potential for major improvements in private-sector investment, and (e) limited credit availability from a financial sector that is still on the mend. As a result, we expect growth to slow gradually to an annual rate of 1½% in the second half of 2010 before reaccelerating in 2011.

2. The unemployment rate should continue to drift up, to about 10¾% by early 2011. We think the ?jobless recovery? pattern of the 1991-92 and 2001-03 recoveries provides a better template for corporate hiring decisions over the next year or two than the more robust payroll rebounds of earlier cycles, and so far the payroll data support this judgment. If this pattern continues, then net hiring will not absorb all of the influx into the labor force that is apt to occur over the next year and a half, in which case the cyclical peak in unemployment will again lag far behind the mid-2009 bottom in real GDP.

Actually there is a lot of good stuff in their report, and I feel as if some of it could have been written by me. There are some fundamental problems with their longer term analysis which I may discuss later.

Tomorrow (Friday) I’ll analyze the GDP numbers for you.

I’m also writing a major piece on the real estate market and its implications on the market. It will be a multi-part article. I should finish it by this weekend.

Some reading on this topic:

Is the Economy Recovering? The Curious Case of 1920 vs. 1929

The Economy in Q3 2009

The Third Quarter Bump

Economic Megatrends That Will Drive Our Future