The agreement in Europe still has many details to be filled in, and the 2.5 percent pace of U.S. economic expansion in the third quarter isn’t enough to bring unemployment down quickly, even if it is sustained. But on both sides of the Atlantic, the news on Thursday offered a sense of relief: Maybe the world isn’t falling apart after all.
“The Europeans told us they’re doing what they can do to take the immediate fear of fnancial collapse off the table, and the GDP numbers tell us that the U.S. economy did not collapse in the third quarter,” said Jerry Webman, chief economist at OppenheimerFunds. “Together they are a kind of sigh of relief.”
Owners of Greek debt will accept a reduction of as much as 50 percent in what they are owed, easing that country’s debt burden; banks will receive new capital; and a fund to back the continent’s governments will be enlarged fourfold, to $1.4 trillion. Analysts cautioned that executing the plan will require more difficult work by European governments in the months ahead.
Over the summer, uncertainty over Europe’s future and a downgrade of U.S. debt helped drive a period of confidence-rattling volatility in global financial markets. But now that the broadest measure of economic activity for that period is in, it appears that U.S. consumers and businesses took the events in stride.
Gross domestic product rose at a 2.5 percent annual pace in the July-through-September quarter, the Commerce Department said, considerably better than the 1.3 percent gain in the second quarter and the 0.9 percent rate of growth for the first half of 2011.
If there is to be a dip back into recession, as some analysts have feared, it appears it did not start in the third quarter.
But GDP was not strong enough to represent a “catch-up” effect that could bring the unemployment rate down substantially over time. Rather, 2.5 percent is somewhere around the treading-water rate of U.S. economic growth — the approximate rate of economic expansion that would be expected, given an ever-increasing labor force and rising worker productivity, but not enough to put many of the 14 million unemployed Americans back to work.
In another sign that the economy is not falling into recession, the number of new people filing claims for unemployment insurance benefits edged down last week, to 402,000 from a revised 404,000 the previous week.
Growth was bolstered during the quarter by a rebound in some of the areas that had held the economy back in the first half of the year. Automobile supply chains that had been disrupted by the Japanese earthquake in the spring reopened, and oil prices moderated after spiking early in the year.