Oct 29, 2020

Axios Thought Bubble

Good morning, Axios' Felix Salmon and Courtenay Brown here to unpack today's economic data.

1 big thing: America's economic rebound
Data: BEA; Chart: Danielle Alberti/Axios

In the last major economic report before the presidential election America's economy grew at a record pace between July and September.

  • Gross domestic product — the broadest measure of the size of the economy — expanded at a 33.1% annual pace in the third quarter, in the wake of a similarly huge quarterly decline three months earlier.
  • The actual quarter-on-quarter rate of expansion, without annualization, was 7.4%.

Why it matters: The economy remains 3.5% smaller than it was at the end of 2019.

A Trump thought bubble, from Axios' Alayna Treene: The economy is still Trump's #1 message ahead of the election, and his team was always going to try to portray this last report as a win for the administration.

  • But with just five days until Election Day, the report is unlikely to move the electoral needle.

By the numbers: GDP peaked in the fourth quarter of 2019, when it hit an annualized rate of $19.25 trillion (measured in 2012 dollars).

  • The current level — $18.58 trillion — is still well below pre-pandemic levels.

With no extra government stimulus in the third quarter, personal income fell by about 2.5%.

  • The personal savings rate fell to 15.8% of disposable personal income — down from the second-quarter peak, but still extremely high by historical standards.

What they're saying: "For context, the economy is roughly as far below its peak as in the darkest days of the last recession," said UMich economist Justin Wolfers.

The big picture: It's still too early to tell whether this recovery is V-shaped, W-shaped (a so-called "double dip"), or whether it looks more like a backwards square root sign.

  • While the third quarter saw strong growth, early fourth-quarter data indicate that growth has flatlined in October.

Be smart: Nationwide aggregates hide a lot of variation — a phenomenon often referred to as a "K-shaped recession." Dense blue states are doing worse than open red states; women are doing worse than men; Blacks are doing worse than whites; the poor are doing worse than the rich.

The bottom line: A single backwards-looking GDP figure can conceal more than it reveals.