Fourth Quarter GDP Revised Downward

(MoneyWatch)  Fourth quarter GDP was revised downward:

A disappointing day, by Ryan Avent: ...let me draw your attention to two stories... First, America's fourth quarter GDP growth has been revised down:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.8 percent in the fourth quarter of 2010, (that is, from the third quarter to the fourth quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.6 percent...

The downward revision to the percent change in real GDP primarily reflected an upward revision to imports and downward revisions to state and local government spending and to personal consumption expenditures (PCE) that were partly offset by an upward revision to exports.

And Britain's economy shrank by more than initially thought:

Britain's economy shrank more than initially estimated in the fourth quarter, complicating the task of the Bank of England as a split deepens among policy makers on whether to withdraw stimulus.

Gross domestic product fell 0.6 percent from the previous three months, compared with an initial estimate for a 0.5 percent drop, the Office for National Statistics said today in London. The statistics office said its "best estimate" for the impact of cold weather on the data remains 0.5 percent. The slump was led by construction and investment.

The American data helps explain labor market figures that looked unusually bad given growth. In both cases, the fiscal and monetary authorities should be asking themselves whether they've overestimated the performance of these economies and their ability to handle big, and largely unnecessary, short-term budget cuts.

Though certainly better than lower growth, a 2.6% growth rate is not much progress. It's basically treading water, though barely. To "recover" what was lost in the recession, including lost jobs, we need to grow much faster than that. Unfortunately for the millions of unemployed, problems at the state and local level are far from over, there are other headwinds working against growth as well (e.g. the prospect of higher oil prices, the end of the stimulus package), but policymakers have moved on to other things. And worse, the main topic presently, cutting the budget, works against the employment and output growth.