Whenever the government releases new economic data, one thing to remember is that the numbers typically get revised in the months that follow — often dramatically. Case in point: The Bureau of Economic Analysis now says GDP grew at a 3 percent rate at the end of last year, rather than 2.8 percent.
Despite the pickup at the end, last year wasn’t a great year. According to the BEA, the U.S. economy expanded just 1.7 percent in 2011, down significantly from the 3 percent pace sustained in 2010. “The slowdown mainly reflected downturns in inventory investment and government spending,” the agency said. Indeed, last year saw the greatest drop in government spending since 1971. Exports and business investment were partially able to counteract all that austerity at the state and local level, but only partially.
Still, the numbers from the end of 2011 are a sign that the economy’s rebounding yet again. According to a Bloomberg poll before the report came out, most analysts weren’t expecting this type of revision.
The bad news is that even 3 percent growth isn’t particularly impressive given the huge unemployment hole we’re facing. According to Dave Altig, research director of the Atlanta Fed, if the United States grows at a 3 percent pace consistently, it would take until 2020 to reach the sort of employment levels we had before the financial crisis hit. In theory, that’s when “real GDP” (what the economy is actually producing) would catch up with “potential GDP” (what the economy could be producing, given our existing workforce and resources).