by Bill McBride on 8/24/2010 03:39:00 PM
Tuesday, August 24, 2010
From the Congressional Budget Office: Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from April 2010 Through June 2010
CBO estimates that in the second quarter of calendar year 2010, ARRA’s policies:Here is the CBO's estimate of the impact on GDP by quarter:
They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent, Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points, Increased the number of people employed by between 1.4 million and 3.3 million, and Increased the number of full-time-equivalent jobs by 2.0 million to 4.8 million compared with what would have occurred otherwise.
The effects of ARRA on output are expected to gradually diminish during the second half of 2010 and beyond. The effects of ARRA on employment and unemployment are expected to lag slightly behind the effects on output; they are expected to wane gradually in 2011 and beyond.
|Change Attributable to ARRA, GDP change (percent)|
|Low Estimate||High Estimate|
Note: the impact on GDP growth (the headline number reported each quarter by the BEA), is the change in spending from one quarter to the next. The ARRA impact on GDP peaks in Q2 2010 and is lower in Q3 2010 by both estimates. This change will show up as a drag on GDP growth in Q3.
Less stimulus spending in Q3 was one of the reason I expected a slowdown in growth in the 2nd half of 2010. There are other reasons that I've listed before: the end of the inventory correction, more household saving leading to slower growth in personal consumption expenditures, another downturn in housing (lower prices, less residential investment), slowdown in China and Europe and cutbacks at the state and local level.
The existing home sales report this morning - especially the high level of inventory and downward pressure on prices - are a key part of the 2nd half story.
Posted by Bill McBride on 8/24/2010 03:39:00 PM