Good news. Revised estimates of economic growth for the end of 2011 reveal that the economy may be recovering quicker than anyone had anticipated.
There is a pleasant surprise in the latest batch of economic data released Thursday by the Bureau of Economic Analysis. Buried deep inside the government’s revised estimate of fourth-quarter growth (revised but unchanged at 3 percent annualized) is an alternate measure of economic activity that is winning increased attention. And by that alternate measure, gross domestic income, the annualized pace of growth in the final three months of 2011 actually climbed to 4.4 percent.
That’s the kind of growth we usually see during an economic recovery, the kind of growth that’s fast enough to create new jobs. Indeed, it suggests that we may have learned the answer to a fretful mystery. Until now, economists have struggled to explain why unemployment was falling so fast when the major measure of growth, gross domestic product, was rising at an exceedingly modest pace.
One reason, among many, that the American Recovery and Reinvestment Act –the stimulus– wasn’t bigger was flawed economic indicators that did not give us a full picture of just how bad the economy had become. We would not learn just how deep the hole was until near the end of 2011 when it was revealed that the economy was nearly twice as bad at the time of President Obama’s inauguration than was previously estimated.
The same flawed indicators may now be contributing to an underestimate of the economic recovery, compounded by the fact that forecasters and analysts are sheepish about being too optimistic. If you got it all wrong the last time around, best not to do so again, right?
GDI growth of 4.4 percent has not been seen since the passage of the stimulus in 2009 and is part of an overall upward trend for the economy.