The U.S. economy advanced by 2.5% in the third quarter, an annualized rate fast enough to dispel fears of a new fall in recession, but not fast enough to signal the economic recovery, writes The Wall Street Journal. GDP growth suggests that the U.S. economy has recovered from the earlier events, including increased fuel prices and turmoil in financial markets that have limited consumption and reduced investment. However, although growth in the third quarter is higher than the previous quarter, the advance is still too small to create enough jobs and further reduce the very high unemployment, 9.1% in September.
“If the American economy would continuously record this growth rate, unemployment rate will not fall”, said Justin Wolfers, an economist at the University of Pennsylvania. The strong growth of investment in private sector was offset by a steep decline in companies’ stocks. A plausible explanation for these results would be that investors have started the third quarter with a high confidence then they suffered a shock. The question now is which of the two – trust or shock – will persist, writes Financial Times.
Another worrying trend is that of consumption. Household spending rose while wages were frozen, an unsustainable growth that increases vulnerability of the economy to financial crises. “GDP evolution is certainly better news than in recent months, but I think we don’t need to open the champagne yet”, according to Brett Hammond, chief economist at TIAA-CREF, a company that manages a pension fund. He warned that the U.S. economy is still exposed to lower U.S. exports and reduce investor confidence in the ability of markets to resolve the crisis of European sovereign debt in the euro area.
In fact, statistics show that the eurozone economy could stagnate or even go into recession by the end of the year, which could complicate even more the efforts to stabilize the crisis using multiple bailouts and fiscal stimulus.