A note on last quarter's GDP growth

This note was of interest.

Prof. Peter Morici of the University of Maryland commented on Wednesday: "Fourth quarter GDP growth was 5.9%, but 66% of that was a slower pace in depletion in business inventories. Businesses continued to sell more goods off their shelves than they produced, but depletion of inventories fell from $157 billion in the third quarter to $20 billion in the fourth. The difference, $137 billion, counts as growth in the arcane world of GDP accounting.

Of the 5.9% increase in GDP, consumption, investment, government, and net exports contributed a paltry 2.0 percentage points to growth. That statistic is more indicative of the sustainable pace of GDP growth, and would indicate job losses will continue or gains will be too small to keep up with the natural growth of the labour force. Hence unemployment, however, will remain terribly high."

Morici says that in January manufacturers added 11,000 breaking a long losing streak, thanks to a 22,700 pickup in motor vehicles and parts production. Trailing auto sales and troubles at Toyota are expected to dampen gains or push manufacturing employment down going forward. Though industrial production has been rising overall, many gains are in durable goods industries that have learned to make many more goods with few workers. . . .