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Kimberly Amadeo

BEA Drops Q4 GDP Estimate to 2.8%

By February 28, 2011

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The BEA 's second estimate of GDP for the fourth quarter (October-December) 2010 dropped to 2.8% from the advance estimate of 3.2 %. This is only slightly better than Q3's 2.6% economic growth rate, and lower than the 3% rate needed to generate a lot of jobs (see analysis at Calculated Risk).

Jolly holiday sales helped drive the growth, contributing 2.8%. The biggest drag? You guessed it - lack of residential construction. The overhang of foreclosed homes in the "shadow inventory" will keep economic growth from breaking out of a 2-3% range for at least this year. In most recoveries, residential construction leads the way, driving growth to a robust 4-5% level - enough to create lots of jobs.

For a history of all GDP reports since 2007, see GDP Current Statistics.

What It Means to You

A 2.8% growth rate means the economy is definitely out of recession and not in danger of a double-dip. Still, you can expect slow growth for awhile. A high foreclosure rate is dragging the economy by stifling bank lending.

One way to profit during a slow-growth economy is to stay focused on what value you provide to your customers. And, yes, even if you are a salaried employee working for a company, you have customers. They are your co-workers, your boss, and your company's owners - which could include stockholders. Stay in tune to their needs, and make sure they know the value you provide. This value is your competitive advantage and your brand promise.

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February 28, 2011 at 7:38 pm
(1) Ronald Grey says:

The February 2011 National Association for Business Economics (NABE) Outlook, released today, also says in addition to a tepid housing market, high unemployment will remain a worry for the rest of Barack Obama’s term.

Taken together the two factors are of special concern: Americans underwater with mortgages in the tepid housing market are less flexible to pursue jobs that may become available.

Ronald Grey
Louisville, KY

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