The Commerce Department released some bad news this morning, revising downard its early estimates for GDP this year. They now think third-quarter real GDP increased 2 percent rather than 2.5 percent as previously indicated. Their nominal GDP estimate took a similar downward revision from 5 percent (decent number but too slow to catch up to the trend) down to 4.5 percent (meaning that we're falling even further behind the trend). These data revisions never attract as much news coverage as the initial releases because they're less "newsworthy" but they're actually much more important. The reason the data get revised is that the sources available to the Bureau of Economic Analysis improve and it becomes possible to give us more accurate information.
Something to note about this is that throughout the Great Recession period, revisions have generally been downward. Something else to note is that throughout the Great Recession we've been afflicted by optimism-biased policymakers who tend to make decisions based on the good news and then not reverse course forcefully in the face of revisions or think probabalistically about how to prepare for future bad news. The American economy is very complicated, and as long as the trends aren't completely horrible there will always be several glimmers of sunshine poking through the clouds. Far too often officials in the executive branch and at the Federal Reserve have let themselves mistake those rays of sunshine for an overall shift in the economic climate. Last, Justin Wolfers observes that the lesser-known Gross National Income data series has generally been more pessimistic than the GDP data and that with revisions GDP has tended to converge to GDI. The time to start celebrating good news may be when we see both of those indicators pointing up. Right now they're pointing to a situation where growth, if we're lucky, will keep up with the increasing size of the population but do nothing to catch us back up to where we need to get.