Is 3.2 Percent GDP Growth Enough?

The news on Friday that our GDP grew at 3.2 percent in the first quarter of 2010 has brought out a chorus of voices on what exactly that number means: Is it good? Is it weak? Is it good, but not good enough? "GDP Still Weak," read the headline on the AP story. But how can it still be weak when the previous quarter had given us rip-roaring 5.6 percent growth?

Here are some figures to compare it to:

* Over the past 25 years, the average annual GDP growth rate in the U.S. has been 2.8 percent.

* Since the onset of the Great Depression with the 1929 stock market crash, average GDP growth has been 3.4 percent.

* Before the recovery, the last time we had a growth number this high was in the third quarter of 2007, when GDP grew at 3.6 percent.

So in the historical context, 3.2 percent growth isn't weak at all. The problem is that within the context of an economic recovery from a deep recession, 3.2 percent growth would mean we have along way to go to reach full economic health. Following the recession of 1981-82, for example, we had four successive quarters starting in 1983 where GDP growth was over 8 percent.

There are estimates that it takes roughly 3.5 percent annual GDP growth to knock one percentage point off the unemployment rate. So at our current rate, we could expect unemployment to get down to around 5 percent in around five years. That's much too long for large sections of the country to be out of work. The bottom line is that even though 3.2 percent GDP growth is normal and comfortable, we have not yet reached the economic circumstances where it's enough.