Yes, the economic growth numbers for the third quarter were revised sharply upward today, from 3.9 percent to 4.9 percent. And no, you shouldn't suddenly feel better about the economy—well, at least if you listen to the bears on Wall Street and their media megaphones. The pessimists say that the fourth quarter—the one we are now in—will see a sharp slowdown in growth as the housing downturn and credit crunch really take a bite out of the economy. And indeed, growth is probably in the midst of a downshift. Certainly, job growth isn't what it was a year ago.
But consider this: If you exclude housing, the economy grew at an astounding 6.1 percent rate, up from a 4.6 percent pace in the second quarter. My guys at Action Economics think gross domestic product growth will average 3.3 percent in the second half of 2007, versus a 2.2 percent average in the first half. That is more or less in keeping with what the White House is looking for. Team Bush today lowered its forecast for economic growth for next year to 2.7 percent from 3.1 percent previously. It also expects unemployment to rise to 4.9 percent.
But the 2008 election impact is this: The economy heading into Election Day will most likely be perceived by voters as worse than it is right now—and right now only a quarter of Americans, according to Gallup, rate the economy as "excellent" or "good."