It’s still about jobs, jobs, jobs

By Silla Brush and Jared Allen

The Commerce Department reported Thursday that the economy grew in the third quarter at rate of 3.5 percent, a sign that the U.S. is climbing out of the recession.
The report attributed the gains to increases in personal consumption, federal government spending, exports and private inventory investments. Motor vehicle output added roughly 1.7 percentage points to the change in gross domestic product, a broad gauge of the economy, as the government's "cash for clunkers" program helped stimulate car purchases.

The gains were better than the expected 3 percent increase, and bring to an end four straight quarters of economic contraction. Still, President Barack Obama downplayed the good economic news in a Thursday statement, and signaled his focus would remain on jobs.

"We’ve come a long way since the first three months of 2009, when our economy shrunk by an alarming 6.4 percent," said Obama, who described the report as an "affirmation that this recession is abating and the steps we’ve taken have made a difference."

"But I also know that we've got a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression," Obama said. "And while this report today represents real progress, the benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."
The economic growth reinforces arguments that the recession, which has raged since December 2007, has technically come to an end, although they do not technically determine that the recession is over. The National Bureau of Economic Research, the official arbiter of when recessions start and end, considers a range of factors, not just GDP.
Lawmakers from both parties were not declaring victory on the eve of the report, which had been highly anticipated.
“We have a long way to go,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, on Wednesday.

“Economists may say the recession is over, but most American families would disagree,” said Rep. Kevin Brady (Texas), the top Republican on the Joint Economic Committee.
With the midterm election one year away, Democrats in particular are wary of crowing too loudly about good economic news when many of their constituents are struggling.

Underlying that concern is the brutal reality that the nation’s labor market is worsening with more Americans losing jobs. The unemployment rate, now 9.8 percent, is expected to continue rising. The nonpartisan Congressional Budget Office estimates that the unemployment rate will average 10 percent throughout 2010 and will not return to pre-recession levels until 2014.

Those numbers are weighing heavily on lawmakers.

“Americans don’t feed their families on technicalities,” said Rep. Xavier Becerra (Calif.), the only member of Democratic leadership to vote twice against the $700 billion bailout of the financial system.

“So technically speaking, we hear the recession is over. On the ground, the hard facts for most American families are that they’re still suffering from tough times.”

Sen. Mike Johanns (R-Neb.) said voters would not feel an improvement in the economy until jobs return.

“To real people out there, they won’t feel the economy has improved until they have a greater feeling of security about their jobs,” Johanns said.

Lawmakers are also dueling over whether the $787 billion fiscal stimulus package and $700 billion financial bailout helped the economy. The financial bailout package was backed by both the George W. Bush and Obama administrations, while the stimulus was one of the first efforts supported by  Obama.
On Friday, the government will release new data on the direct impact in job numbers of the fiscal package’s spending provisions. The Obama administration has been touting the various spending and tax provisions under the package as a key measure in stabilizing the economy.

A range of private estimates and Obama administration predictions shows the package having a positive impact on between 800,000 and 1.5 million jobs.
Christina Romer, chairwoman of the Council of Economic Advisers, said Thursday that analysis by her council and outside groups suggests the stimulus had added 3 or 4 percent to GDP growth.

"This suggests that in the absence of the Recovery Act, real GDP would have risen little, if at all, this past quarter,” Romer said in a Thursday statement.
Republicans, however, have slammed the stimulus package and say that it has little or nothing to do with the growth rates. Brady said that the package had “very little” to do with those rates. He said the growth is largely due to expansionary policies by the Federal Reserve and changes in private markets.

“We’re all looking for signs of recovery in the economy,” Brady said. The growth rate is, he said, “another step back toward recovery, but one the White House had very little to do with.”

But for Democrats looking to shore up perceptions of the controversial program, the growth numbers could help make their case. Bill Galston of the Brookings Institution said, “If you’re trying to stop the bleeding both in the economy and in perceptions of the economy, then being able to point to signs of hope is not trivial.”

Anne Kim, an analyst at the Third Way, a think tank aligned with centrist Democrats, said that the most important statistic will be the unemployment rate next summer. “We don’t have to be at full employment next November, but people just have to feel that things are getting better,” Kim said.

That’s one reason why Democrats, and some Republicans, are now supporting additional federal measures to help prop up the economy, including an extension of an $8,000 first-time homebuyer tax credit and additional benefits for unemployed workers.

“The problem is we need, I think, ways to stimulate employment,” Frank said.