Economy Watch - 10.30.2008

| Thu Oct. 30, 2008 1:08 PM EDT

ECONOMY WATCH....I guess it's now official that the economy sucks:

The U.S. economy shrank by .3 percent in the third quarter, government data released this morning shows, confirming an economic slowdown that was already showing itself through steady job losss and declining consumer sales.

....The drop in personal consumption was a particular drag on growth. Consumer spending accounts for about 70 percent of U.S. economic activity, and it dropped at a 3.1 percent annualized rate between July and September — the biggest quarterly decline in more than 20 years.

....It was in large part a jump in government spending — at the federal, state and local levels, with a more than 18 percent annualized increase in defense spending — that held off an even steeper decline. Overall government spending added 1.15 percent to GDP.

With his usual impeccable timing and sense for the public mood, John McCain naturally took this moment to....stop talking about the economy and instead try to suddenly "steer the presidential-campaign conversation to national security." Nice work, Senator.

As for the economy itself, I think everyone now agrees that we're in a recession. But did it start in the third quarter, or did it start last December? It almost feels like we need a new word here. High schools now call their advanced algebra classes "precalculus," and the first half of this year feels like it was a "prerecession." There really didn't seem much doubt about where we were headed, but technically we weren't quite there. Now we are.

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