GDP Figures Expected To Show Economic Growth
RENEE MONTAGNE, host:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
STEVE INSKEEP, host:
And I'm Steve Inskeep. Good morning.
There was a time just a few months ago when it may have felt like we were never going to reach this day. Later this morning, the government releases figures to tell us how much the economy grew during the last three months, and economists are predicting the data will show the economy grew for the first time in a year. Not that everything's better. Unemployment's still very high and yet here a suggestion of some economic improvement.
NPR's John Ydstie is here to talk with us about it. Good morning, John.
JOHN YDSTIE: Hi, Steve.
INSKEEP: How strong is this growth likely to be?
YDSTIE: Well, economists think the economy might have grown at an annual rate of as much as three percent in the past three months. That would be a big bounce back from the 6.4 percent rate of contraction that we went through at the beginning of this year. The big question is, can we hope to have this kind of robust growth going forward?
INSKEEP: And that is key because when you look at other severe recessions, sometimes there is a double dip recession, or in a nightmare scenario the Great Depression where there was now and again a glimmer of hope and then things went bad again.
YDSTIE: Right. But in this case the government has taken strong action, and we've gotten a lot of fuel in the last three months from this government stimulus - the Cash For Clunkers program that boosted car sales and then put cars back on the dealers' lots; we've had the homebuyer tax credit that's helped to support housing prices; and then of course we've had the Fed injecting trillions of dollars into the economy to keep the interest rates low.
We've also had the Obama stimulus package, $787 billion, about half of which has been spent so far. So this growth has been supported by an unprecedented amount of government stimulus.
INSKEEP: I suppose the question must be whether that growth can be sustained without the stimulus when the stimulus is spent?
YDSTIE: There is still a lot of uncertainty about that. We've seen a lot of companies reporting profits over the last few months, but a lot of that profit-making is due to cuts, including cuts in jobs. I mean, during this last quarter, when we expect that we've seen some strong growth, the economy has actually continued to shed jobs - more than half a million of them. And it's going to be hard to get the economy on a real sustainable growth path until you start to add jobs and put money in people's pockets, and economists don't expect that to happen until sometime well into next year.
INSKEEP: And we've talked about that a lot here. Employers are reluctant to believe that the improvement is permanent and take on the quasi-permanent expense of a new employee with all the benefits and everything that goes along with that.
YDSTIE: That's absolutely right. And so we're going to have to continue depend in the next few months on some of this government stimulus. I mean there's still some stimulus left in the tank.
INSKEEP: I wonder if that's a good side of something that was criticized early in the year. The government was criticized for not spending stimulus money quickly enough, but I suppose that means that here we are, the economy seems to be improving, and there's still a lot in the bank.
YDSTIE: You know, that was part of the planning. If you'll remember back to when this was being debated, part of the issue was we want to have stimulus long enough so that we can sustain - get growth at a sustainable level. So we'll continue to see a lot of government stimulus in the coming months.
INSKEEP: And let's remember here, John Ydstie, even though there's an expectation that we'll hear about growth returning today, this is still an extraordinary situation with extraordinary government spending after an extraordinary crisis. Is there any sense among the people you talk with about how long it might take to get back to what feels like a normal economy?
YDSTIE: It's going to take a long time before we get back to normal. And normal is going to be something different than the rapid growth rates that we had during the bubble years. In fact, a lot of economists say we'll have a new normal, growth rates in the one to two percent over a period of time as we make these adjustments. So it could feel very different for the next several years.
INSKEEP: NPR's John Ydstie, thanks very much.
YDSTIE: You're welcome, Steve.
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