GDP Figures Indicate Recession Is Easing
LINDA WERTHEIMER, host:
This is MORNING EDITION from NPR News. I'm Linda Wertheimer.
STEVE INSKEEP, host:
And I'm Steve Inskeep. Good morning. Renee's away in Afghanistan.
We have some evidence here in Washington, this morning, that the biggest economic downturn since the Great Depression may be getting a little closer to ending. The latest numbers say the U.S. economy continued to shrink during the second quarter of the year but at a much slower rate than before. The Commerce Department released data this morning, showing the growth rate fell by one percent between April and June, compared to 6.4 percent the quarter before that.
NPR's Jim Zarroli is covering the story and joins us now. Hi, Jim.
JIM ZARROLI: Hi, Steve.
INSKEEP: So are people taking this as good news?
ZARROLI: Yeah, because things were not - are not as bad as they were. I mean, basically, this was the fourth straight quarter of declining growth. In other words, the fourth time in a row that the amount of goods and services produced in the United States fell. This has been a very long, stubborn recession. It got underway in December 2007. It's still going on. It's lasted longer than anyone thought. It's - and it's been more severe than anyone expected. We have, you know, 9.5 percent unemployment.
This quarter, the quarter that just passed, April, May and June, we saw drops in business spending, consumer spending, inventory investment - all these things declined. Consumer spending, which is a big part of the economy, fell by 1.2 percent. People are feeling insecure about their jobs, so they're spending less and they're saving at a rate they haven't saved in more than a decade.
INSKEEP: So I suppose, if this is positive news at all, that you'd phrase it that instead of the entire building burning down, maybe there's only several floors burning?
ZARROLI: Yeah. I mean, this is - recessions tend to end in a certain way, not completely predictable. But when things happen, we can state with some confidence that the recession is ending. And that's what happened. I mean, we saw declines in this past quarter, but they were smaller declines than we had before that.
I mean, for instance, business spending on computers and equipment, which is one of the things the Commerce Department tracked, fell by 36 percent in the winter.
ZARROLI: Last quarter, it fell by nine percent. And the same kind of thing can be said about, you know, other parts of the economy. You know - so this is really the first confirmation we've had that the recession is easing. We -before now, we've had a lot of data suggesting that, I mean, almost everyday, suggesting that things were improving. I think now it's undeniable. It's here in black and white. It looks like the winter of 2009 is going to be remembered as the peak of the downturn.
INSKEEP: There are many economic questions here, also, political questions, and one thing that people will be asking is about President Obama's stimulus plan, which has been much criticized in recent weeks. Can economists now say that the stimulus bill has had some positive effect?
ZARROLI: Well, here is what we can say. This was the quarter in which a lot of stimulus money was spent, and government spending was one of the few real clear areas of strength in the economy. We saw federal spending in the first quarter fall by 4.3 percent. Last quarter, it was up nearly 11 percent. And the same was true, maybe to a lesser degree, with state and local government spending. It was down in the winter but back up last quarter, despite the fact that so many state governments like California seem to be slashing. They were spending more in the second quarter.
Now, the government says we still have more money. We still have more stimulus money in the pipeline, and that should help us out in the third quarter. Eventually, that has to run out. And the question really happens - that comes up now is what happens when it does run out? Will we need more stimulus money? I mean, there were certainly economists who said that the stimulus package that we passed this year wasn't quite big enough. We needed more. If they're going to make that case, now would be the time to do it.
INSKEEP: NPR's Jim Zarroli is in New York. Jim, thanks very much.
ZARROLI: You're welcome.