GDP NUMBERS OFFER SOME ENCOURAGEMENT.... It's never a good thing when the U.S. economy shrinks. It's even worse when it shrinks for four consecutive quarters -- the longest contraction since the 1940s.

But given the seriousness of the recession and economic crisis, and in light of the numbers from the last couple of quarters, the new report on the gross domestic product offers at least some encouragement.

The American economy shrank at an annual rate of one percent from April through June, the government reported on Friday, stoking hopes that the longest recession since the Great Depression was nearly over.

The economy's long, churning decline leveled off significantly in the second quarter, as stock markets started to recover from their worst levels in a dozen years, some housing markets stabilized and the rampant pace of job losses tapered off.

"We're in a deep hole, and now we've got to dig ourselves out of it, which is a very difficult task," Diane Swonk, chief economist at Mesirow Financial, said.

In the fourth quarter of 2008 (October through December), the economy shrank at a pace of 6.3%, which was horrifically bad. In the first quarter of 2009 (January through March), the contraction was 6.4%, which further pointed to an economy in free fall.

The expectations for the second quarter (April through June) were that the economy would shrink 1.5%, and this morning's numbers suggest the country's output did slightly better than expected.

This will, in all likelihood, generate quite a bit of talk about the "end" of the recession. With that in mind, it's probably best to temper expectations. Economist Mark Zandi noted this morning, "We're going from recession to recovery, but at least early on, it's not going to feel like one. For economists, this is a seminal part in the business cycle, but for most Americans, it won't mean much."

And why's that? The NYT added, "That is because the job market is expected to remain dismal even after the economy resumes growing. As business picks up after a recession and companies start receiving more orders and restocking their shelves, employers will still resist hiring new full-time workers, and instead pay overtime or rely on part-time employees."

The AP report added that consumer spending declined in the second quarter, but a "return to spending by governments helped economic activity in the spring."

The national economy at least seems to be moving in the right direction for a change; the free fall is over; and talk of a "depression" has disappeared. It's not recovery, but at least it's not more bad news.

—Steve Benen 9:15 AM Permalink | Trackbacks | Comments (10)