Unexpectedly Intriguing!
October 8, 2010

Now that we have a tool that relates the rate of economic growth to changes in the unemployment rate in the U.S., we can use today's employment situation report to back out roughly how much GDP grew in the third quarter of 2010!

GDP and Unemployment Rate Data
Input Data Values
Today's Year-Over-Year GDP Growth Rate [%]
One-Year Ago's Quarterly Unemployment Rate [%]

Change in Unemployment Rate
Calculated Results Values
Year over Year Change in Unemployment Rate [%]
Expected Level of Today's Unemployment Rate [%]

To do that, we first entered the 9.7% unemployment rate that applied in the third quarter of 2009 into our tool, then beginning with our default GDP growth rate of 2.5%, we systematically adjusted that figure until we matched the 9.6% unemployment rate that applies for the third quarter of 2010 in the tool's results.

That corresponds to an actual year-over-year growth rate of 3.2% for inflation-adjusted GDP. Since the GDP figure for the third quarter of 2009 was $12,860.8 billion (in terms of constant 2005 U.S. dollars), that would place real GDP for 2010Q3 at $13,272.3 billion, provided that our relationship between GDP and the unemployment rate holds.

We'll note that figure falls very close to the $13,284.3 billion target value we officially forecast earlier this week, and well within the $13,019 billion to $13,550 billion range that defines the lower and upper limits of our full forecast range for GDP in 2010Q3. We had given nearly 70% odds that GDP would be recorded to be between $13,144.8 billion to $13,423.8 billion, so we would expect to be very much on track when GDP for 2010Q3 is first reported toward the end of this month and finalized in December 2010.

But that 3.2% year over year real growth rate for GDP is not the growth rate that will be reported by the Bureau of Economic Analysis later this month. The BEA will actually report an annualized quarterly growth rate for GDP, based upon how much GDP changed from the second quarter of 2010 to the third quarter of 2010.

One-Quarter GDP Growth Rate Temperature Gauge, 2010Q2 Final Estimate We then find the annualized compounded growth rate of GDP from the second quarter of 2010 ($13,194.9 billion) to the third quarter of 2010 (which the unemployment data would place around $13,272.3 billion) to be about 2.4%.

That would place the one-quarter GDP growth rate for 2010Q3 in the "blue zone" of our GDP temperature gauge, which indicates slow economic growth when displayed against the backdrop of the typical economic growth has seen since the 1980s. Our temperature gauge chart here shows the one quarter GDP growth rate through the second quarter of 2010 for reference.

We therefore anticipate that the last GDP data that will be reported before the 2 November 2010 national election in the United States will very likely indicate continuing sluggish economic growth.

Looking forward, if the GDP figure is finalized at the level that today's employment situation report would suggest, the fourth quarter of 2010 would slow from 2.4% to 2.0%, going by our modified limo forecasting technique, which would indicate that the employment situation in the U.S. is unlikely to meaningfully improve through the end of the year.

Labels: ,

About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Stock Charts and News

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.