Fourth quarter economic growth numbers convey mixed signals.  The Bureau of Economic Analysis reported that real gross domestic product (GDP) grew faster than initially reported, expanding at an annual rate of 5.9 percent in the final quarter of 2009.  The higher revised estimate, which is 0.2 percentage points higher than the preliminary estimate released last month, was due to firms drawing down private inventories at a rate that is even slower than was previously reported and higher exports.  Those gains were partially offset by higher imports (which contribute negatively to GDP), a larger decline in spending by State and local governments, and a smaller increase in personal consumption expenditures.  Demand for domestically produced products (GDP less inventory change) was revised downward to 1.9 percent (initially reported as 2.2 percent growth).  The lowered estimate for growth in demand for US-made goods, both at home and abroad, may foreshadow lower growth in the future.  However, at last week’s Monetary Policy Report to the Congress, Federal Reserve Chairman Ben Bernanke presented the Fed’s  projections of  GDP growth for 2010 being in the range of  2.8 to 3.5 percent, slightly higher than the Fed’s November 2009 forecast for 2010 (the Fed’s 2011 and longer term projections did not change from the November forecast).  

Gross private-sector job creation expands.  The Bureau of Labor Statistics (BLS) reported that firms cut 8.0 million jobs while adding 6.4 million jobs in the second quarter of 2009 (see Chart).  This job creation figure reflects a spurt in private sector job creation, which had been declining since the middle of 2008.  The job creation figures are still much lower than the nearly 8 million jobs created on average each quarter during the Clinton administration, highlighting the need for policies not only designed to stem job losses, but also to stimulate job creation as the economy comes out of recession.  On Friday, the Joint Economic Committee will hold a hearing on the February 2010 Employment Situation to examine current labor market conditions and employment trends.  Given extreme weather conditions throughout the Northeast during the second week of February, Friday’s employment report may show a large decline in employment.  A similar weather event was experienced in January 1996, and BLS reported 200,000 jobs lost in January 1996 with a subsequent 700,000 jobs gained in February 1996.

Home sales fall. The Census Bureau reported that new single family housing sales dropped 39,000 units (at an annual rate) from December to January, an 11 percent decrease.  Sales of existing single family homes also fell in January, declining by 6.9 percent to a seasonally adjusted annual rate of 4.4 million units, according to the National Association of Realtors.  As was the case with the initial expiration of the homebuyers’ credit end of 2009, sales will likely pick up in the months leading up to the April 30, 2010 expiration of the expanded home buyers tax credit.  However, some economists  fear that the tax credit may have accelerated purchases that homeowners were already planning to make and that the demand for housing will fall once the credit expires.