Economy Sees Lift From Stimulus

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The rise in unemployment is slowing down and we’re pulling out of this recession sooner than expected.


The reason is clear to me: we stepped in, took action and did something instead of just allowing the markets determine our fate.

WSJ explains…

The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. “There’s a method to the madness. We’re getting out of this,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.

Economists say the money out the door — combined with the expectation of additional funds flowing soon — is fueling growth above where it would have been without any government action.

And yes, we can project whether doing nothing would have been better…

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter — something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.

For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. “Without that extra stimulus, we would be somewhere around zero,” said Jan Hatzius, chief U.S. economist for Goldman.

Yes, I know this is like fingernails across the chalkboard to several of you, but sometimes it’s entirely appropriate for the government to step in, prevent calamity and then leave. And now we see some positive steps that we’re moving forward again. Perhaps not a V-shaped recovery, but I definitely don’t think we’re going to see a “Lost Decade” as they did in Japan.

Hell, we’re actually making money from the TARP program and being repaid A LOT faster than we first thought. Also, there’s a chance we could make money from Freddie and Fannie. Obviously this wasn’t the intention when we stepped in, but a welcome surprise for taxpayers nonetheless.

More as it develops…