Oops

The BEA reports that GDP rose at only 2.8 percent in 2009Q3, not 3.5 percent as reported last month. We seem to be moving away from rather than towards my prediction of 4 percent. There does not appear to be a single culprit: consumption of all kinds was a bit weaker than the BEA thought earlier, residential and nonresidential investment were both weaker, imports took more away from growth than previously thought, inventory investment added less.

The new data helps explain last quarter's employment numbers: with GDP growth at 2.8 percent (pretty close to the historical average growth rate), we would not have expected any improvement in the employment situation. The rise in unemployment and the continued loss of jobs is not a mystery due to structural changes in the labor market, but simply a result of weak growth.

I'd be a fool not to start to question my faith in a modestly strong recovery at this point. The point I made awhile ago (really Bob's point) still holds however: every quarter that inventory disinvestment continues at its historically high pace (still estimated at -133 billion in Q3) creates the possibility of a bigger spike upward in inventory investment in future quarters. So it's possible that some of the 0.7 percent drop in growth due to this revision will be added to growth in a future quarter.