Yet Another Downward Revision

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As predicted here, the “third” estimate of third-quarter U.S. GDP saw yet another downward revision.  Recall the “advance” estimate was 2.5% growth, while the “second” estimate was 2.0%.  (Translation: the “advance” estimate is the preliminary estimate, the “second” is the revised estimate, and the “third” is the final estimate.)

A growth of 2.5% is about what it takes to keep the unemployment rate constant.  A 2.0% growth rate is all right, but pretty anemic.  The 1.8% growth announced today is very anemic.

Given the very low rate of real growth, why did the unemployment rate drop in November?  The answer I posted three weeks ago was the decrease in the size of the labor force as discouraged workers stop looking for work, reducing the number of unemployed.  That explanation looks even more plausible in light of the slow growth of the third quarter GDP.

This is from the BEA website (edited slightly and put into a real table for easy pasting into Excel).

“Revisions

The third estimate of the third-quarter increase in real GDP is 0.2 percentage point, or $6.2 billion, lower than the second estimate issued last month, primarily reflecting a downward revision to personal consumption expenditures that was partly offset by an upward revision to private inventory investment.  (Figures are percent change from preceding quarter.)

  Advance Estimate Second Estimate Third Estimate
Real GDP

2.5

2.0

1.8

Current-dollar GDP

5.0

4.6

4.4

Gross domestic purchases price index

2.0

1.9

2.0”

Source: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm