In a big surprise to most economic analysts, the economy grew at its fastest rate in six years during the last quarter, increasing at an annual rate of 5.7 percent. (It may get downgraded later, so don't get too excited.) The bulk of the growth, as CEA Chair Cristina Romer explains, came from companies re-investing in inventory -- during a recession, businesses typically burn through existing inventory and wait for better economic signs to restock. That's why, though that growth won't likely be replicated in the next quarter, it's still a good sign: Businesses expect that people will be buying more of their goods, and this is traditionally how recoveries start.
The real question is, where are the jobs? Consumer demand remains sluggish after increasing slightly, and we're really seeing the vicious cycle between high unemployment and low consumer demand, where businesses don't hire because there isn't enough desire for their products and people can't buy products because they don't have jobs or worry about losing them. There will be more announcements about jobs policy from the White House today that we'll be following closely.
-- Tim Fernholz
