• Whoa! First 4th-quarter GDP estimate is huge! More later as we digest it. #
• Dan's been a busy blogger. http://www.clucerf.org/blog/ #

We are thrilled to see the first estimate of the 4^th quarter GDP come in way above our forecast, but we wish we had forecast the change.  We do expect to see the initial estimate revised down in subsequent releases.

Why did the GDP estimate come in so strong?

Mostly, it was investment.  Fourth quarter 2009 private investment activity and consumption grew with such strength from third quarter that resulting fourth quarter GDP growth was a resounding 5.7 percent (annualized).  The bulk of this growth, two-thirds of it, came from private sector investment activity.   About ninety-percent of the private sector investment activity was driven by inventory spending. 

Inventory changes have been negative since the second quarter of 2008, and it was massively negative during the first three quarters of 2009, as establishments corrected their stockpiles in light of the recession.  Inventory change was still negative in fourth quarter, but was much less negative than in the third quarter, indicating increased spending to slow the inventory decline.  See chart below.

The foreign trade sector and the government sector played little roles in driving fourth quarter economic growth.  Trade contributed half a percent to overall GDP growth as export growth rose and import growth fell.  Government sector expenditures actually contracted slightly during the fourth quarter of 2009.

These GDP growth results will improve people’s perceptions about the economy.  Households, many of whom have volunteered to sit on the sidelines rather than make purchases, may now begin to move back into the arena of making purchases and investing in the future. 

The future path of business inventories is very uncertain.  We could see inventory changes increase again during 2010, providing further stimulus to GDP growth.  Then again, the relatively weak 4^th quarter retail sales may cause businesses to decrease target inventories.  While we remained concerned about many weaknesses that remain in this economy, including residential real estate, commercial real estate, banking, and household balance sheets, our next United States forecast will likely be more optimistic.

• Gave our first Oregon & Central Oregon Forecasts in Bend today, about 275 there. Well received, even if news is not great. I Love Bend. #

• More on the trade wars: http://bit.ly/9kR8Lx Ricardo must be rolling in his grave. #

• Dan and I blog on extraordinary monetary policy options: http://bit.ly/4opJAx #
• How's that minimum wage working out? http://bit.ly/598VMH Ask an unemployed young person. #

• Very cool Hayek vs Keynes Rap at Mankiw: http://bit.ly/4RBhmg Really, it's worth a watch. #
• Dan blogged on new Central Oregon's jobs data: http://bit.ly/4KqcyB Charts even, how cool is that? #
• The head of the Dallas Fed on why the Fed needs to be independent: http://bit.ly/8w9dza Absolutely correct. #
• In The Nation, Geithner must go: http://bit.ly/7lv06j "well known as a lapdog of Wall Street" Ouch! #
• Attack of the Minimum-Wage Increase: http://bit.ly/6cVVoS #

The Oregon Employment Department’s Labor Market Information System released December 2009 jobs and employment data for Oregon’s counties today.  In most respects, Central Oregon’s labor market is not significantly changed from November, and very close to our forecast.

The Bend MSA (Deschutes County) seasonally-adjusted unemployment rate fell from 14.2 percent in November to 14 percent in December.  The Jefferson County unemployment measure fell from 14.4 to 14.1 percent, while the Crook County measure rose from 16.7 percent to 16.8 percent.  The declines are due to labor force declines, and not new jobs.

Year-on-year non-farm jobs changes were negative for each of the three counties, which was the case in November.  The year-on-year job declines moderated slightly for Crook County, from a 13.6 percent decline in November to a 11.1 percent decline in December.  The year-on-year job declines for Deschutes County and Jefferson County were unchanged at 2.5 percent declines and 3.2 percent declines, respectively.

In Crook County, the year-on-year job declines are in all sectors except Retail Trade and Leisure/Hospitality, which is counter to the trends in the State and the United States.  In Deschutes County, the year-on-year job declines are in all sectors except Leisure/Hospitality, Personal/Maintenance Services, and Government.  In Jefferson County the year-on-year job declines are in only six sectors, in contrast to the State and the Nation.  The non-declining sectors include: Construction, Wholesale Trade, Retail Trade, Technology, Education/Healthcare, Leisure/Hospitality, and Personal/Maintenance services. 

Central Oregon’s job resilience in Leisure/Hospitality is due to tourism and December tourism at least as evidenced by this jobs report, is providing support to the Central Oregon economy.  In part at least, this is due to better early-season ski conditions. Tourism will likely support the Central Oregon labor market for a few months yet to come, which is good news indeed.

We interpret the Central Oregon December jobs report as indicating the area is still “Bumping Along the Bottom”.  However, if the non-tourism sectors can begin a process of recovery, then along with the strength in Tourism, the area’s economy could begin a nice recovery.

• FDIC shut down 5 banks last night, including Oregon's Columbia River Banks: http://bit.ly/4NVm8W #
• Will Illinois default before California? http://bit.ly/6GLeFd I need to figure out how to run a poll on our website. #
• Bill Lockyer, I hate to say I told you so, but: http://bit.ly/5wg7W5 No, I really don't. Are you going to apologize? No CA cash in April! #
• Things have changes since I was a kid in Northern CA. http://bit.ly/6rpQWH We shut down football practice for the first week of deer season. #

• I support some of the proposals, but "Revenge Isn't an Economic Policy" http://bit.ly/6veq1z Need focus on jobs,jobs, and jobs. #
• U.S. venture capital falls to lowest level since 1997 in 2009: http://bit.ly/7sbeTG Not good. #
• World poverty is falling: http://bit.ly/4T386i Excellent news! We could all use some of that these days. #

• Unemployment claims rise "unexpectedly" again: http://bit.ly/7fFbfJ 7.2 million jobs lost in this recession, 7.2 million. #
• California may not be able to sell bonds: http://bit.ly/8vezUH Yes, but anybody who thinks they may not pay their bills is a fear monger: #
• California budget "by the numbers" at Capital Weekly: http://bit.ly/63ZUht Ugly numbers too. #
• It is way too early for this talk about taking away the punch bowl: http://bit.ly/8XTqBa You have to have a party first. #
• Sovereign debt issues may mean the party never starts: http://bit.ly/6bzwUb The probability of another financial crisis is relatively high. #