GDP for the third quarter was 1.9%. That is a little above expectations and somewhat below the pace over the previous year.
Consumer spending remains strongish (+2.9%) and business fixed investment continues to fall (-1.3%). No big surprises.
Consumer spending remains strongish (+2.9%) and business fixed investment continues to fall (-1.3%). No big surprises.
This means that GDP growth for the last two quarters averaged ~2.0%. Why is notable is that unemployment rate continued to come down over this period, more evidence that the trend growth rate in the economy is below 2%.
In the good case, when the unemployment rate stops falling (and labor force participation stops rising, which could take longer), the GDP growth rate will settle down around 1.75% give or take. Not much monetary policy could do about this type of slowdown.
In the bad case, growth will fall below trend. In that case, monetary and fiscal stimulus could both help.
How to tell the good case (falling to slow trend growth) from the bad case (falling below trend): is the unemployment rate rising. So far it is not but anything could happen.
