Figures Suggest Recession's Worst Is Over

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The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. The report from the Commerce Department Thursday, indicates the economy is entering a new phase of recovery.


This is MORNING EDITION from NPR News. I'm Renee Montagne.


And I'm Steve Inskeep. Good morning.

Let's try to sort out this morning's economic news. The Commerce Department is out with new gross domestic product figures. So this is a measure of all the goods and services that we produce across the economy. And these figures show the economy actually grew in the third quarter of this year at an annual rate of 3.5 percent, which is certainly better than the quarters before and a lot better than a lot of economists have been expecting. It's the strongest sign yet that the recession may be over.

We're joined now by NPR's Tamara Keith, who's covering the story. She's in our studios live. Good morning.

TAMARA KEITH: Good morning.

INSKEEP: How significant is this growth figure of 3.5 percent?

KEITH: It's definitely a strong showing. And we are coming out of four straight quarters of negative growth. So you know, this long, dark period seems to be ending. We hadn't had that long a stretch of negative growth since they started keeping track of quarterly data back in the 1940s.

But there's also this feeling that we don't know if it's real, that, you know, like at the end of a horror movie when they think that they've killed the bad guy and everybody is like, hah, and then he comes back. And we just aren't sure where we are in the movie right now.

INSKEEP: And it's just a reminder, you can't judge too much by a single quarter that goes down or up. They don't define it as a recession if it's just one quarter of decline. And you can't say the recession is over necessarily just because of one quarter of growth.

KEITH: Though pretty much everyone I'm talking to is saying that the recession is over, but we're also not partying like it's 1999 because, well, the jobs recession is not over. We just got new jobs numbers today that say something like 530,000 people last week filed for unemployment insurance for the first time. That doesn't sound like the end of a recession.

So if you talk to someone who doesn't have a job or whose neighbor doesn't have a job, which, you know, is just about all of us, they're like, what, recession over? I don't believe that.

INSKEEP: Certainly not over in the job market. But let's look at the growth that is there, that is measured, the increase in the value of goods and services produced. How much of that is due to government spending, stimulus spending and so forth?

KEITH: Well, the government sector was a huge growth area in this quarter. Government sector grew by 7.9 percent, so that's pretty big growth. We also have Cash for Clunkers. We have the new homebuyer tax credit, all pushing spending. And I spoke with economist Nariman Behravesh at IHS Global Insight. He said these interventions really can only go so far though.

Dr. NARIMAN BEHRAVESH (IHS Global Insight): Clearly what was going on with both the very unorthodox and aggressive actions by the Federal Reserve and by the federal government was to try to help the economy come out of this deep hole it was in. And I think in that sense it succeeded. What they can't do, and the economy on its own has to do, and business and households have to do, is bring about a strong recovery.

KEITH: And we also have to remember that the Fed and the Treasury have been doing all kinds of interventions of their own and keeping interest rates incredibly low and keeping mortgage rates incredibly low. So he says that all of these things have helped end the recession, but there's no guarantee that it's going to be a strong end. And you know, we keep hearing this W-shaped recession idea that it could bounce back down.

INSKEEP: Okay. So you have a double-dip recession, that's what you're talking…

KEITH: Exactly, a double dip.

INSKEEP: …a possibility, anyway, at this point.

KEITH: Well, you know, there's a lot of possibilities out there.

INSKEEP: Tamara, thanks very much.

KEITH: Thank you.

INSKEEP: That's NPR's Tamara Keith. And the news again this morning is that the economy is growing. At least for now. The Commerce Department reported the GDP, gross domestic product, expanded in the last quarter by 3.5 percent, the best showing in a couple of years.

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