MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris. More ammunition today for both sides in the argument over whether the U.S. economy is in a recession or not. That ammunition came in the form of the government's latest numbers on gross domestic product, or GDP. The GDP measures the total output of goods and services in the economy. It's the broadest measure of the health of the U.S. economy, but as NPR's John Ydstie reports, it doesn't always tell the whole story.
JOHN YDSTIE: The government says that in the second quarter of this year, the economy expanded at just under a two percent annual growth rate, not bad for an economy some say could be in a recession. But today's report also contains some revisions.
Among them was a determination that in the last quarter of last year the U.S. economy actually contracted just slightly, by two-tenths of a percent. That led several prominent economists to suggest it was proof positive the U.S. is in a recession. Not so, says Bill Cheney, chief economist for John Hancock Financial in Boston.
Mr. BILL CHENEY (Economist): The fact that we've had growth of about one and two percent in the first couple of quarters of this year suggests to me that we're definitely not in a recession, and there are aspects of this report which suggest that we're probably not going to be.
YDSTIE: What's been fueling economic growth is U.S. exports. Overseas buyers find U.S. goods and services especially attractive because the weak dollar makes them cheaper. The government stimulus checks have also boosted growth, says Cheney. Consumers have spent about 20 percent of what they got so far. He thinks the economy could still get a little pop from additional stimulus spending this summer, so he's doubtful a recession will materialize. But there are some economic events not directly reflected in GDP numbers that also affect people's economic well-being.
On a street in the Brambleton neighborhood of Ashburn, Virginia, realtor Joe Domand(ph) stands in front of a town home that's about to be auctioned off.
Mr. JOE DOMAND (Realtor): There are signs all over the house indicating that there's definitely going to be an auction and it's public and anyone's invited.
YDSTIE: What's the price level for most of these town homes right now?
Mr. DOMAND: Just over a year ago, the builder was selling them, and some of the people that are going in foreclosure were buying them at 600, 625,000. They're selling now for about 440.
YDSTIE: That nearly 30 percent drop in the value of this home is not reflected in the GDP numbers, even though it represents a big financial setback for the former owner and probably the lender that held the mortgage. And home price declines from 10 to 30 percent have been felt in many areas of the U.S.
Mr. LYLE GRAMLEY (Former Federal Reserve Governor): There's no question that the American people are hurting a lot.
YDSTIE: That's former Federal Reserve governor Lyle Gramley, now senior economic advisor for the Stanford Group.
Mr. GRAMLEY: We know, of course, that GDP is a number that doesn't include the decline in home prices. It doesn't include the decline in your stock portfolio. It doesn't record the effect on your psyche when you see foreclosure signs going up in your neighborhood.
YDSTIE: While these factors aren't directly represented in the top-line GDP number, says Gramley, they do translate into the sense of wealth and well-being that Americans feel. That means they could ultimately translate into lower consumer spending, which does directly affect GDP growth.
Economist Bill Cheney says the low level of consumer spending in the past year is evidence that's already happening. In any case, he argues, the gross domestic product is the most comprehensive measure of what the total economy is doing, and right now it's growing.
Mr. CHENEY: So we're not looking at the kind of shrinking in the overall economy that has accompanied essentially every recession we've ever had, but having said that, the fact remains that for six consecutive months this year, and we may find it's seven tomorrow, we've been losing jobs, and jobs in a fundamental sense are the basic measure of how well the economy is serving people.
YDSTIE: The August employment report will be released by the government tomorrow. Cheney says while job losses have been smaller than in previous downturns, if the economy isn't creating jobs, there's something wrong with the economy. John Ydstie, NPR News, Washington.