The initial estimate on 3rd quarter 2010 U.S. GDP came out this morning.  Real GDP growth was very weak.  From Calculated Risk:

From the BEA:

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 2.0 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis.

Click on graph for larger image in new window.

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The dashed line is the median growth rate of 3.05%. The current recovery is very weak – the 2nd half slowdown continues.

Although this is technically a tick higher than real GDP growth in the 2nd qtr, let’s also remember that this is only the advance or “flash” estimate.  There’s an excellent chance it will be revised downward next month.

More important though is the composition of the growth.  Increases in inventories accounted for 1.44 of the 2.0 points of real growth.  That can’t continue.  There is  a very good chance 4th qtr will be even slower and still a very good chance of a negative  growth number in 1st quarter.  Even if we stay in what is mathematically positive growth, it’s far too slow.  We need real growth of over 3.0 % in order to reduce unemployment.

Calculated Risk shows what effects different real GDP growth rates would have on unemployment:

Real GDP is still 0.8% below the peak at the beginning of the recession.  Industrial production is still 7.5% below the pre-recession peak and employment is 5.6% below peak.  It will be a long time before we get back to full employment.  The  Federal Reserve Bank of San Francisco is forecasting full employment no sooner than 2014.

The economy continues to effectively stagnate.  Maybe that’s the smell. Stagnation.