This year has been a tale of two recoveries. The jobs numbers show an economy that's having one of its best years since 2010, but the GDP numbers show it's having one of its worst. How do we reconcile this?
This, as you can see above, is what mean reversion looks like. Not that there's been as much of it as the headline numbers might lead you to believe. GDP tends to be very volatile -- because inventory spending and net exports are volatile. So if we strip those out, leaving us with what's called final sales to domestic purchasers, we get a better sense of the economy's underlying strength (or weakness). Final sales to domestic purchasers grew 3.4 percent in the second quarter, which was just enough to make up for the weak, polar vortex-induced 0.7 percent growth at the start of the year. The economy, in other words, wasn't as bad as we thought a few months ago; nor is it as good as we think now. It's still just chugging along, like it has been the whole recovery.
But the slow and steady recovery might, just might, be slowly speeding up. This, of course, is extremely provisional. There have been plenty of false dawns before. (Remember "green shoots" or "recovery summer" or "recovery winter"?) But the stronger final sales to domestic purchasers and stronger jobs numbers the past six months give us reason to hope that the economy might, ever-so-slightly, be picking up. As economist Justin Wolfers points out, it's a mix of stronger consumer spending, more business investment, and less austerity (though the taper tantrum seems to have hurt housing).
This acceleration isn't spectacular, but it is real. Just like the rest of the recovery.