GDP, jobs news: Economic growth small, but welcome
— -- After a steady stream of recent confidence-sapping news, investors and consumers on Thursday welcomed slightly more upbeat data that suggest that the economy, while sluggish, is still in growth mode.
None of the fresh economic readings on growth, jobs and borrowing costs point to a sharp acceleration soon. But together, they indicate that a much-feared double-dip recession is not a certainty, economists say.
The government revised the nation's economic growth for the April-to-June quarter to 1.3% from 1%. That tiny rise in GDP, while still far below the 3% to 4% growth rate considered healthy, was enough to boost hopes that the economy could avoid another recession.
"It's good news but it's not great news," says Edward Yardeni, chief economist at Yardeni Research. "The news has been awful on so many fronts that any ray of sunshine is welcomed."
Investors also got positive headlines on the European debt crisis. Germany approved changes that would bolster the firepower of the eurozone's bailout fund, a key tool needed to help Greece avert a disorderly default and keep its debt woes from infecting other European countries and causing a global slowdown.
That helped fuel a rally on Wall Street. Stocks, on track for their worst quarterly loss since 2008, rose about 1%. More good economic news is needed for investors to feel confident enough to buy stocks and keep the rally going, says Chuck Carlson, CEO of Horizon Investment Services.
For the first time since early August, initial jobless claims fell below 400,000 last week. Claims fell by 37,000 to 391,000. Still, job creation must rise and the unemployment rate, now 9.1%, must fall for the economy to gain traction, says Mark Zandi, chief economist at Moody's Analytics. "Either things improve, or we're going to go into the soup," he says.
Another potential plus came in the depressed housing market, where the average 30-year fixed-rate mortgage hit an all-time low of 4.01%, according to Freddie Mac. But despite the super-low rates, not all Americans will benefit, says Greg McBride, senior financial analyst at Bankrate.com. The best rates are only available to those with good credit, proof of income and, if refinancing, plenty of equity in their home.
"Despite all the things we've been through — the Japanese earthquake, $4 gas, policy mistakes in Europe — we're still growing," Zandi says.
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