[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/08/06/senate.clunkers/art.clunkers.gi.jpg caption="Much of the third quarter’s growth was driven by a rebound in auto sales, which were helped by the government's Cash for Clunkers program."]
CNN Financial News Producer
Have we finally turned a corner in this recession? New signs say “yes.”
We learned this morning that the U.S. economy grew at a better-than-expected 3.5% annual rate in the third quarter, ending a string of declines over four quarters that resulted in the most severe slide since the Great Depression.
The GDP report is one more indication that the economy has likely pulled out of the deep recession that started in December 2007.
Of course the reading by itself doesn't mark the end of the recession; the economy actually grew in the second quarter of 2008. And the National Bureau of Economic Research – the group which officially dates the beginning and end of recessions - is not expected to declare that the current recession has ended until sometime in 2010.
But the stronger-than-expected growth is likely to lead more economists to declare that the economy hit bottom earlier this year and turned higher at some point in the summer.
Much of the third quarter’s growth was driven by a rebound in auto sales, which were helped by the government's “Cash for Clunkers” program. The economic stimulus package, with public works projects and aid to state and federal governments, boosted growth as well.
As a result, some economists raised doubts about how long such strong growth can last once the stimulus measures begin to wind down. This is also just the initial third-quarter growth estimate. We’ll be getting two revisions down the road.
And in light of all the economic damage we’ve suffered - 7.2 million jobs lost since January 2008, unemployment at 9.8% and expected to climb, 6.3 million foreclosures since December 2007 - it’s going to be while before you hear any champagne corks popping on Main Street.
One key to the recovery is jobs, and today we also learned that the number of Americans filing first-time claims for unemployment insurance was little changed last week.
Initial claims dropped to 530,000 in the week ended Oct. 24, down 1,000 from an unrevised 531,000 the previous week. And continuing claims dropped by 148,000 to 5,797,000.
Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, or people whose benefits have expired.
About 7,000 people in this country see their benefits expire every day.
The GDP number lit a fire under stocks on Wall Street, propelling the Dow Industrials to a triple-digit gain.
Coming into today, the Dow and S&P 500 ended three of the last four sessions lower, and the Nasdaq declined in all four, as investors turned cautious after a seven-month stock rally. Early enthusiasm about better-than-expected third-quarter corporate profit reports gave way to questions about the strength of the economy, causing investors to pull back.
Earnings from Dow components ExxonMobil (missing estimates) and Procter & Gamble (beating estimates) were largely ignored by investors.
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