Explaining Southern California's economy

Can we really get excited about 0.2 percent better GDP growth?

Northwest Connecticut Hit Hard By Economic Slowdown

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A closed factory sits in Waterbury, Connecticut. The government has revised up U.S. GDP growth numbers for the second quarter, but GDP continues to be weak.

Under the circumstances, we should take it. The Commerce Department just revised up second quarter U.S. GDP growth to 1.7 percent from 1.5 percent.

If you're keeping score at home, this means that in the second quarter of 2012, the U.S. economy grew at a rate that matches expansion in the whole of 2011 — a rate that was considered abysmal at the end of last year, in the context of a fourth quarter in 2011 that saw GDP growth of 4.1 percent.

I like to keep an eye on GDP as it relates to unemployment, which is currently at 8.3 nationally, higher in California and L.A. Growth at 1.7 percent — or anything under 2 percent, really — isn't enough to make much of a dent there. In order to get nearly 13 million unemployed Americans back to work, we need to add 350-400,000 new jobs each month. We're doing less than 100,000 these days, after starting the year at about 200,000-per-month pace. 


Welcome to the era of slow U.S. economic growth

Mercer 1163

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Secretary of the Treasury Timothy F. Geithner (L) and William C. Dudley (R), President and Chief Executive Officer of the Federal Reserve Bank of New York, listen to Federal Reserve Chairman Ben S. Bernanke (C) speak during a hearing of the House Financial Services Committee on Capitol Hill March 24, 2009 in Washington, D.C.

The fourth quarter of 2011 was much better for the U.S. economy than the year as a whole. But if you can believe it, it actually disappointed many economists. The economy grew at a rate of 2.8 percent, a vast improvement over the sub-2-percent growth that typified the year. But we were looking for 3 percent GDP growth

I know, I know — 0.2 percent doesn't sound like such a big deal. Unless your yearly GDP is $14.5 trillion and you need to add something like 350,000-400,000 jobs each and every month to bring unemployment down to pre-crisis levels (nationally, it's at 8.5 percent now).

This is from Reuters:

The Fed on Wednesday said it expected to keep interest rates at rock bottom levels at least through late 2014, and Chairman Ben Bernanke said the central bank was mulling further asset purchases to speed the recovery.

The central bank warned the economy still faced big risks, a suggestion the euro zone debt crisis could still hit hard.

"We're still repairing the damage done by the financial crisis. On top of that we face a more challenging world. We have a lot of challenges ahead in the United States," U.S. Treasury Secretary Timothy Geithner said at the World Economic Forum in Davos.

Prospects of sluggish growth could hurt President Barack Obama's chances of re-election in November.

The economy grew 1.7 percent in 2011 after expanding 3 percent the prior year, and the unemployment stood at a still-high 8.5 percent in December.


Falling unemployment plus rising GDP growth equals a Happy New Year

A jobs sign hangs above the entrance to


A jobs sign hangs above the entrance to the US Chamber of Commerce building in Washington, DC. New claims for US unemployment insurance dropped last week to a level last seen more than three years ago, government data showed December 15, 2011 in a sign of stabilization in the troubled jobs market.

There's been a big debate in economics over the past few months about whether the U.S. will fall into another recession. One side points to continued high unemployment and sluggish growth, as well as the perception that the economy is in the dumps (and in an economy, perception is very important to consumer behavior, which accounts for 70 percent of economic activity in the U.S.). 

The other side says, basically, that we aren't seeing unemployment go up or GDP growth go down, and besides, most industries have declined so far that there's nowhere to go but up. Therefore, no double-dip recession.

The data favors the latter argument. This is from the LA Times:

Growth has picked up steam through the fall as dropping gas prices put more money in consumers' pockets and businesses rebuilt their inventories. Economists project the annualized growth rate from October through the end of the year could be as high as 4%.

Helping fuel that recovery is continued improvement in the job market.

New jobless claims declined again last week, falling to 364,000, the lowest level since April 2008, the Labor Department said Thursday. The four-week average of 380,250 is below the 400,000 figure that economists say is key to cutting into the unemployment rate.


The top 10 business stories of 2011

This picture shows the disaster zone in


10. JAPANESE EARTHQUAKE/TSUNAMI. The Japanese earthquake and tsunami, as well as the subsequent nuclear crisis, rocked the global manufacturing supply chain, affecting everyone from consumer electronics companies to carmakers. The tragedy caused great suffering and significant loss of life. As far as the business world goes, it also crippled the Japanese auto industry and allowed both General Motors and Ford to stage big comebacks.

Obama Makes A Statement To Press At White House

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9. AMERICAN GETS DOWNGRADED! Will America always be triple-A? Standard and Poor's didn't think so when, in August, it downgraded the USA from its long-held AAA credit rating to a mere AA+. Wait! Wasn't that the same S&P that gave AAA ratings to the subprime bonds that were backed by "toxic" housing assets during the financial crisis? Um, yeah. But no matter. The rating agency was reacting to the fight over the U.S. debt ceiling, evidence to many that Congress had become totally dysfunctional.

Amazon Introduces New Tablet At News Conference In New York

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8. THE iPAD KILLER ARRIVES! There was no tablet market until earlier this year — there was an Apple iPad market. But a worthy competitor to Apple's runaway success finally arrived in the form of the Amazon Kindle Fire. And at $199, the price was certainly right. Let the Great Tablet Battle begin!

LinkedIn Corp.'s IPO Awaited On Wall Street

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7. SOCIAL MEDIA GOES PUBLIC. The tech IPO market had been moribund until LinkedIn, the business-oriented social networking site, led the charge back in May. It rose as high as $122 per share before settling to earth. But it still looks to end the year with a market cap above $6 billion.

Former MF Global CEO Jon Corzine Testifies To House Hearing On Company's Bankruptcy

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6. CORZINE GOES DOWN. After being defeated for re-election as governor of New Jersey, Jon Corzine, formerly of Goldman Sachs, decided to try for one last big Wall Street score. He went to work for a sleepy brokerage, MF Global, and placed a big bet on European debt — just in time for the European debt crisis! Bankruptcy followed. Client money disappeared, Corzine was last seen testifying before Congress. The disgraced CEO may next been seen heading for jail.

Activists Demonstrate In Support Of Homeowners Facing Foreclosures

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5. FORECLOSURES FOREVER. In 2011, the housing crisis continued to grind on. But the big banks began to once again more forward on foreclosures, after sorting out the legal implications of the robo-signing scandal. The year ends with lenders attempting to move more than 2 million homes through the foreclosure process.

Anticipated Biography Of Steve Jobs Goes On Sale

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4. STEVE JOBS, RIP. October 5, 2011: the day America's greatest business and technology visionary since...Thomas Edison? Walt Disney? died after a battle with various types of cancer. Millions of people — probably billions — worldwide were affected by the news. In a testament to how convincingly Jobs had brought Apple back from the brink — from near-bankruptcy to, briefly, the world's biggest company — many learned of his death on a device he had effectively created.

France's President Nicolas Sarkozy (C) s

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3. THE EURO CLINGS TO LIFE. For years, the eurozone had been struggling with a debt crisis that seemed localized to Greece. But 2011 was the year it all fell apart, with the crisis spreading to Italy, Spain, and even roiling the economies of France, Germany, Great Britain, and the United States. German Chancellor Angela Merket and French President Nicholas Sarkozy formed a strange sort of marriage as they worked on a solution. For every victory there was a defeat. And at year's end, it was still unclear whether the single currency would survive.

Job Fair At Marlin Stadium Draws Many Seeking Employment

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2. THE JOBLESS RECOVERY. By November, U.S. unemployment at last fell below 9 percent. It was the worst recovery in employment from a recession since the Great Depression. And there was really no end in sight, as economist continued to predict slow growth in 2012. Some prospective workers, members of the long-term unemployment, simply gave up and quit looking.

Labor Union Protesters Marches To Zuccotti Park

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1. OCCUPY WALL STREET. What began as a little-noticed protest in a park in lower Manhattan exploded into a national movement in less than two months. It was the 99% versus the 1%, with the 99%er claiming that inequality in American could no longer be tolerated. By December, protesters had been ousted from public and private locations in major U.S. cities and the movement had begun to occupy college campuses. Will the movement have a future? 2012 will tell. But Occupy Wall Street was, hands down, the biggest business story of the year.

It may have been the most crazy, crazy, crazy year in business and economics since...well, since the Financial Crisis in 2008. In fact, it may have topped that surreal episode. We began the year with some economists expecting better than 3 percent GDP growth in the U.S. and ended it with anti-Wall Street protests from coast to coast, the eurozone on the ropes, and unemployment still hovering above 8 percent. 

Click through the slide show to get the blow-by-blow, from the Japanese earthquake and tsunami to the ongoing foreclosure crisis. May you live in interesting times? For everyone's sake, let's hope 2012 is rather less interesting.

Oh, wait...it's an election year! 

Methinks we're going to need helmets in 2012.


U.S. GDP growth is revised lower, but that's no reason to panic — yet

Should have gotten to this yesterday, but better late than never. And just in time for Black Friday, the traditional kickoff for the holiday shopping season!

The Bureau of Economic Analysis revised down its data for U.S. GDP growth in the third quarter. What was 2.5 percent, which was pleasantly surprising when it was announced, became 2 percent. So the economy grew in the third quarter, just not as much as was originally thought.

This isn't really a good thing — that 2.5 percent figure caught observers off guard and gave economists firm reason to believe that the economy isn't going to fall into another recession. But under the circumstances, 2 percent isn't terrible. And losing half a percentage point of GDP doesn't mean that we have to gird ourselves for a double-dip. In fact, it means that the economy continues to grow, a sign that if nothing else, unemployment won't climb higher than 9 percent.