GDP Growth and Unemployment

Dean Baker’s take on the news today that the U.S. economy grew by 2.5 percent in the third quarter is clear, concise, and worth reading. Here is a snippet:

It is very difficult to view 2.5 percent growth as much less than disastrous. At this rate the economy is growing just fast enough to keep pace with the growth of labor force.

That means we are making zero progress in reducing the unemployment rate. If the economy continues to grow at a 2.5 percent pace, the unemployment rate will remain around 9 percent indefinitely with tens of millions of people unemployed, underemployed or out of the labor force altogether.

He doesn’t think there was ever a strong chance of a second recession, but thinks that the media promoting that possibility in recent weeks is why this data is being reported so positively.