- The US
economy grew 7.4% during the third quarter, or 33.1% at an annualized rate. - But the
economic recovery still has a long way to go, experts say. - The
GDP may not reflect the economic wellbeing of average people. - "It's masking these pockets of real distress," former Federal Reserve economist Claudia Sahm said.
The US economy expanded 7.4% during the third quarter of the year, the Commerce Department reported on Thursday. It's the largest growth rate ever recorded in a three-month period. At an annualized rate, it grew 33.1%.
President Donald Trump and other Republicans touted these figures on Thursday morning. "Biggest and Best in the History of our Country, and not even close," the president wrote on Twitter. "Next year will be FANTASTIC!!!"
The government reports these statistics in an annualized rate, which means it's what would happen if the economy grows or shrinks the same way for a year (four quarters).
But the big figures veil a critical reality: The nation's economy has not fully recovered from the pandemic — and it still has a long way to go. The latest surge doesn't make up for all the ground lost in the second quarter.
"Big jump down, big bounce back," Justin Wolfers, an economist and senior fellow at the Brookings Institute, wrote on Twitter. "What really matters is that we're not all the way back."
A chart from George Pearkes, a macro strategist with the Bespoke Investment Group, illustrates the hole that the US economy hasn't dug itself out of yet.
—George "Grants To State & Local Gov NOW" Pearkes (@pearkes) October 29, 2020
The US economy is smaller than it was last year.
"The economy is -3.5% smaller than it was in late 2019," Wolfers said. "Is that a big hole? Well, that's roughly as large as the hole the economy fell into during the financial crisis, and at the time we thought that a damn big hole."
The large growth follows another period of unrivaled economic contraction for the second quarter of the year, as businesses closed down and people stayed home to curb the spread of infections. The latest report — and the last major economic one before the election — reflects the rebound that took place once the economy started reopening.
It doesn't fully represent the nation's economic environment without more context. Many economists say growth is now sharply slowing down with the lack of another stimulus package from Congress.
GDP is one gauge for recovery during a recession, experts say, though it may not reflect the economic wellbeing of average people.
"You're not able to say anything on who's benefiting directly with the GDP. It's a statement about how the economy's output is increasing," Claudia Sahm, a former Federal Reserve economist, told Business Insider. "It's masking these pockets of real distress."
Millions of Americans remain out of work, and the GDP report coincided with the release of another one on unemployment claims. The Bureau of Labor Statistics reported on Thursday morning that 1.1 million people filed for unemployment last week.