5.7% Real GDP Growth Rate in the Fourth Quarter (Where Oh Where Is My Okun's Law? Department)

The Bureau of Economic Analysis:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent. The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 26, 2010...

No surprise. But we are still all gobsmacked by what next week's productivity number will be--between 7 and 8%...

It's not just in this past quarter that productivity growth has been abnormally high given what is going on with real GDP. Look back at the past eight quarters: we are substantially outside of previous post-WWII American experience.

The linear relationship is:

8Q CHANGE IN UNEMPLOYMENT = 0.0277 - 0.4350*(8Q CHANGE IN REAL GDP)

You expect 8 quarters over which real GDP has not grown to see a rise in unemployment of 2.78%--and 8 quarters over which real GDP has fallen by 1.62% to see unemployment rise by 3.5% and not 5.2%.

A world in which the unemployment rate were not 10.0% but rather 8.3% would be quite a different world than the one we live in...