For Immediate Release
Statement by Chad Stone, Chief Economist, on Today’s Economic Growth Repor
WASHINGTON - Today's report on second-quarter economic
growth shows that the economy is no longer in free fall. It also
provides evidence that the economic recovery legislation that the
Administration and Congress enacted earlier this year is doing what it
was reasonably expected to do.
mainstream economist believed that the recovery measures would produce
an immediate turnaround in the economy, but they did expect them to
slow the downward spiral and help generate a turnaround sooner than
would otherwise occur. The first outcome is already happening and the
second is likely. After falling at an annual rate of 5.4 percent in
the fourth quarter of last year and 6.4 percent in the first quarter of
this year, economic activity as measured by real (inflation-adjusted)
gross domestic product (GDP) fell a much smaller 1.0 percent in the
second quarter (see chart). Three-quarters of the business forecasters
surveyed earlier this month by Blue Chip Economic Indicators expect
that the bottom of the recession will occur before October.
economy still must dig itself out of a deep hole over the next few
years. Economic activity stimulated by the stimulus measures that are
continuing to kick in will provide a useful boost as a recovery takes
shape. The unemployment rate, which is traditionally a "lagging
indicator" of economic improvement, will continue to rise well after
GDP begins to grow, but will not reach as high a level as it would have
without that boost.
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