Economic Growth - Q3

Folks are writing that Q3 GDP growth is around 1.4%, slightly less as compared to the estimate for Q2, which was 1.6%.

These rates of growth probably mean that unemployment is increasing. Growth rates of 2.5% to 3% (estimates vary by economist) are needed to create 1.5 million new jobs per year new entrants to the labor force. The American economy is not even providing new jobs for these people.

Until unemployment goes down, there will be dim prospects for economic growth. Cisco systems reports from their perspective that the recovery is bumpy at best. With so much uncertainty, corporations are not going to invest with the intent of expending business.

All indications are that it will be a lean holiday season for retailers. I hear very little about any predictions for 2011. Things are much to uncertain to make estimates of economic growth for next year.

As time goes on, there will be increasing pent-up demand for various goods and services. I think part of the current stock market rally is the hope by investors that pent-up demand will spark higher economic growth in Q4 and 2011.

I think this is a bit of wishful thinking as consumers continue to be under severe financial pressure.

As a final thought, with the expiration of stimulus tax credits for first time home buyers, the outlook for home prices is extremely bleak. There will be severe declines this Fall according to some analysts.

Overall, consumers have little if any ability to go on a buying spree. This is affecting business investment in capacity, thus becoming an additional damper on economic growth.