GDP rose by +7.4% in Q3 (pretty much exactly as expected), after falling by -9.0% in Q2 and -1.3% in Q1. All told, the economy is -3.5% smaller than it was at the end of 2019.

For context, the economy is roughly as far below its peak as in the darkest days of the last recession
When the economy rises by +7.4%, some will report this as being at an "annualized rate" of 33.1%.

Lemme be crystal clear: This does not mean that the economy is now one-third bigger. (Lemme explain...)
Reporting *quarterly* GDP growth at an *annualized* rate answers the question: If the economy also grew at this rate for the next 3 quarters, how much larger would the economy be?

But there's no chance that will happen, so the annualized rate answers a question no-one is asking.
There will be lots of political chatter about today's GDP number. It's true, Q3 is a record rate of growth. But note Q2 was a record contraction, the likes of which we've never seen before.

Big jump down, big bounce back. What really matters is that we're not all the way back.
So where are we?

The economy is -3.5% smaller than it was in late 2019. Is that a big hole? Well, that's roughly as large as the hole the economy fell into during the financial crisis, and at the time we thought that a damn big hole.
Was this an unexpectedly large rebound?

Not really. Go back to the start of the year, and look at the forecasts from then, and most forecasters were expecting the economy to basically stop in Q2, and then largely rebound in Q3.
Ugh, I broke my own thread. Rest of the GDP thread continues below... https://twitter.com/JustinWolfers/status/1321795829972295680
You can follow @JustinWolfers.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled: