Q3 GDP Growth More Like 2.8% Than 3.5%

The government’s optimistic reading of GDP growth in the 3rd quarter was distorted by a pair of rose-tinted glasses, it now says. The Commerce Department has revised its estimate down to 2.8% from 3.5% on evidence that stimulus programs like Cash for Clunkers and the homebuyers' tax credit did not spur as much spending as previously thought. Still, home spending was up 19.5%, and durable goods spending up 20.1%.

The new, more anemic numbers reinforce the widely-held belief that the economy is not rebounding fast enough to reverse the unemployment trend. “The best thing we can say about the labor market right now is that it may be getting worse more slowly,” Ben Bernanke tells the AP. One bright spot, the Wall Street Journal notes, is the important metric of home prices, which rose in September for the fifth straight month, to around fall 2003 levels. (More Department of Commerce stories.)