Tomorrow morning, October 29, 2020, the Bureau of Economic Analysis is going to release their Advanced Estimate of Gross Domestic Product for the 3rd quarter. By almost all estimates, the number that will be reported is going to be a large number. Consensus seems to be that the annualized rate will be around 30-35%. To put this in historical perspective, it will be around double the next highest quarter, which was in 1950 at 16.7%. Without knowing more, that is impressive.

However, we do know more. First, let's understand what this number actually means. Does this mean that the economy increased by 1/3 in a single quarter? No, what this means is that if the economy grew at the same pace it did in Q3 for 4 consecutive quarters, then it would have grown at 35%. In the same way, when the economy shrunk by about 31% in 2020:Q2, it did not get cut by 1/3. If the annualized growth for a quarter is 35%, that means the actual quarterly growth is about 7.8 (7.8 * 7.8 * 7.8 * 7.8 = 35). Similarly, the second quarter actually retracted by about 9%, rather than by 31%.

Again, an annualized growth of 35% is an impressive number by itself. It will surely be touted by Trump and his media team as the "BEST QUARTER IN HISTORY" and be used as one more reason Trump has done better for the economy than any other president! We've seen it with the unemployment number he points back to. We saw it when he touted in the 60 Minutes interview and the last debate that he's added over 11 million jobs in the last five months. Incredibly impressive numbers, without knowing more.

So, let's add some perspective. After the decline of the first two quarters this year, the real GDP was at $17.3 trillion. The fourth quarter of 2019 ended with a real GDP of $19.3 trillion. If we have a third quarter at 35% annualized growth, that means our GDP will now be at $18.65 trillion (17.3 * 1.078). This is around the same level as the 2nd quarter of 2018.

Just like the claim about adding over 11 million jobs, bragging about 3rd quarter growth is simply ridiculous. We're still at a net loss of over ten million jobs for 2020 (or the same level as June 2015). And we're still two years behind in our economy growth.

But as always, Trump will be spiking the football and doing a ridiculous end zone dance while we're still down by 4 touchdowns.