Views on Growth

The WSJ starts its reporting of the GDP release on a “strong note”:

The U.S. economy posted its strongest growth in 11 years during the third quarter, supported by robust consumer spending and business investment.

When it comes to describing growth, the annualized rate is not the most illuminating, the reason being its high volatility.

Since the bounce back from the 2008-9 “Great Recession”, for the past four years annualized growth has averaged 2.3% with a standard deviation (SD) of 2.0.

Meanwhile, the year-on-year growth has averaged 2.2% with a SD of 0.56 and the four-quarter-accumulated rate, a good measure of trend, has also averaged 2.2% with a SD of only 0.31.

The chart illustrates:

Views on Growth_1

The following chart shows that growth, both nominal and real  accumulated over 4 quarters, have been remarkably stable (low SD) since the bounce-back.

Views on Growth_2

Maybe (and hopefully) a slight upward trend is developing, but we can´t discard “growth frustration” going forward. After all, as Benyamin Appelbaum has written:

“I think Ben and Janet would have worked it about the same way so far,” said Jon Faust, an economist who served as a special adviser to the Fed’s board until September, when he returned to a position as a professor at Johns Hopkins University. “Their philosophies, their underlying view of macro, their view of the limits of policy — those views are, in what I observed, remarkably similar.”

2 thoughts on “Views on Growth

  1. I have never met Jon Faust, and he could be a wonderful and intelligent economist.

    That said, the Fed already has 750 econimists on staff. Jon Faust now becomes one more economist with economic ties to the Fed.
    If the Fed wants fresh perspectives, why do not they reach out to the Market Monetarists?
    If the Fed does not want fresh perspectives, why hire a Jon Faust?

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