The real economy. What 1.9% growth means to you
Bottom Line: There are a couple of quick takes from the 3rd quarter GDP report. First, we’re not in a recession. Second, analysts continue to underestimate economic growth. Just as detractors said three percent growth wasn’t possible until we achieved it last year, we continue to see that the real economy – that’s 70% driven by consumer spending exceeded all estimates. That showed up in the ADP Report which also showed more jobs being added in October than expected.
So, what’s real? What’s happening with the economy? With 1.9% growth for the 3rd quarter, we’ve averaged economic growth of just over 2% for the past year. It’s not 3% but it’s still pretty solid for this point in the cycle. In fact, it’s still better than the 1.8% average of the eight years of the Obama administration. And again, 2%+ is far from a recession.
In my analysis there are three critical economic growth levels that project what we can expect economically in United States. They are… The 1% growth economy, the 2% growth economy and the 3+% growth economy.
- The 1% growth economy is one which places the economy at imminent risk of recession and isn’t producing new employment or income growth
- The 2% growth economy that is treading water. It’s a status quo economy that will generally keep pace with inflation
- The 3%+ growth economy, which if sustained, produces a steady stream of new employment opportunities and significant opportunity for income growth
A status quo economy when the economy is struggling isn’t a good thing. However, with near record low unemployment rates and record high wages, a status quo economy is a pretty good thing. And that’s exactly what we have in this economy, a pretty good thing.