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Despite Upshot in Employment, No Real Changes in Long-Run Trends

Source: EPI's analysis of Bureau of Economic Analysis National Income and Product Accounts (Table 1.1.1 and Table 1.4.1)

By Josh Bivens
The Bureau of Economic Analysis (BEA) reported today that gross domestic product (GDP)—the widest measure of overall economic activity—grew at a 2.8 percent (annualized) rate in the third quarter of 2013. This was a slight increase relative to the second quarter’s 2.5 percent growth rate. 
However, there is little reason to celebrate today’s GDP numbers. For one, they remain disappointingly weak for an economy with so much productive slack. Further, growth in final demand—GDP stripped of the contribution of volatile inventory investments—grew at just a 2.0 percent rate in the third quarter. This arguably better indicator of underlying economic strength indicates that growth in the second quarter is essentially on the same disappointing trend that has characterized most of the recovery phase since the official end of the Great Recession. Additional evidence that third quarter growth was insufficient to soak up the economy’s productive slack is the continuing very low rates of core inflation measures. All in all, this is a status quo GDP report, and it clearly remains the case that the economy needs further support from both fiscal and monetary policy to generate growth sufficient to spur real improvement in the U.S. labor market.
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By Heidi Shierholz
The jobs report released this morning by the Bureau of Labor Statistics showed the labor market gained 204,000 jobs in October, along with an upward revision of 60,000 to prior months’ data, bringing the average growth rate of the last year to 194,000. There appears to be no discernible impact on the payroll numbers of the partial government shutdown in October; in the payroll survey federal employees on furlough during the partial government shutdown were still considered employed. Importantly, the labor force participation rate dropped 0.4 percentage points to its lowest point of the downturn, 62.8%. The unemployment rate was little changed in October, ticking up slightly to 7.3%. The partial government shutdown may have played a role in the unemployment numbers, since federal employees on furlough during the partial government shutdown should have been counted as unemployed on temporary layoff in the household survey.
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