Growth ... if not jobs

Tomorrow is GDP day. It's the first look at economic growth during the second quarter, a figure that is currently expected to be just slightly negative and, absent any shocking deviation from that result, everyone will soon start looking to the third and fourth quarters where a return to growth is anticipated.

The chart below from this USA Today story lays out what some economists expect to see later this year, meaning that, over the next few months, we should all get ready to hear the phrase "jobless recovery" about twice as much as we heard "subprime" back in 2006 .

And don't expect that to change through 2010 and maybe not in 2011 or 2012. We'll be hearing the phrase "jobless recovery" more frequently and longer than what anyone can imagine today and, sadly, that's probably the best case scenario.

You see, economic growth in the U.S. is reported as the annualized rate of the quarterly change in output - consumer spending, government spending, domestic investment, net exports - and, after what we've seen over the last few quarters, "flat" will be the new "up".

Leading indicators point to growth in our future, but it won't feel that way, particularly if you're out looking for a job.

The USA TODAY/IHS Global Insight economic outlook index predicts GDP growth for October through December, the first increase since September 2008. Helping fuel the growth was improvement in financial indicators, such as the stock market, and increases in building permits. The rate of decline in the number of hours worked has also stabilized.

The index predicts future real GDP growth (gross domestic product, adjusted for inflation) based on 11 leading economic and financial indicators. The decline in real GDP, at a six-month annualized rate, slowed from -5.9% in March to -2.8% in July. It's expected to reach the break-even point in October and increase progressively through the end of the year. Recent gains in the index, though small, have been persistent, which is a good sign.

Seven of the eleven leading indicators in the Economic Outlook Index were positive contributors in July: building permits, non-defense capital goods orders, stock prices, ISM export orders, the interest rate yield curve, light vehicle sales and the real federal funds rate. Three indicators had a negative effect on the index, including the corporate bond spread, a decline in the average growth rate of the real money supply and higher crude oil prices. One indicator was neutral: the decline in the number of hours worked has stabilized.

It's funny that building permits are one of the key positive components in this group of leading indicators because, as of January, they were down almost 80 percent from the high in 2005 but, since that time, they've risen about 20 percent.

While this hefty gain in 2009 may sound quite impressive, it still leaves them more than 70 percent below the 2005 peak and more than 60 percent below the pre-housing bubble average between about 1996 and 2003.

The other thing that you'll be hearing a lot is, "It doesn't feel like a recovery".