Economy posts another weak quarter; get used to it

It's a little better than expected. But it's not good enough.

The U.S. economy grew at a meager 2 percent annual rate in the three months that ended Oct. 1, according to government data released Friday. That's a little faster than most forecasters were looking for. But this is just the first of the government's three GDP readings; these early estimates have a way of getting trimmed back when the final numbers are printed. Stay tuned.

The housing market remains the biggest damper on growth: investment in residential real estate plunged nearly 30 percent after the June expiration of the government's tax credits for first time home buyers. Falling home prices, high unemployment and the ongoing foreclosure mess are going to continue to weigh on the economy in future quarters. Maybe years.

Much of the gain in third quarter GDP came from businesses taking advantage of extremely low borrowing costs to buy new equipment, extending a shopping spree that's been underway all year. Business investment rose 12 percent in the third quarter. But that was less than half the pace of the second quarter, suggesting the boost from business spending may be fading. Even if it holds up, that investment isn't creating jobs. If anything, companies are investing in software and machinery to boost productivity from existing workers so they don't have to hire more people.

Consumers did their part - boosting consumption spending by 2.6 percent. But they had to dip into savings to pay for it, so that's not sustainable. Much of that spending went to buy goods made overseas: imports jumped 17 percent, more than three times the gain in exports. Despite weakness in the dollar, that trade gap widened, further damping down GDP growth.

There's no mystery behind the causes of yet another quarter of weak economic growth. The federal government's stimulus spending may have headed off a deeper slide, but the impact of all that spending is fading. State and local governments are scrambling to fill big budget holes - and laying off workers to try to balance the books. The housing industry is in its worst slide in 60 years, and the latest data don't offer any hope it will recover soon. Some 3.5 million families have lost their home to foreclosure; there may be double or triple that number to come unless government or the lending industry comes up with effective solutions.

And with the midterm election just days away, there's little talk of wider solutions to the economic quagmire. The most common refrains on the campaign trails are vague promises to "fix" the deficit and create jobs. Specific proposals are in short supply.

That leaves the heavy lifting to the Federal Reserve, which has been making loud noises about embarking on another half-trillion-dollar shopping spree for government bonds - with the goal of pushing bond prices higher and interest rates lower. That may help people who own bonds - like banks, insurance companies and other big investors. But bargain basement rates haven't done much to get banks lending or businesses hiring. There's little indication that another round of bond-buying by the Fed will change that.