The advance announcement (the rough draft) of the real GDP growth rate for the 4th quarter of 2011 came out this morning, at an annualized rate of 2.8%.
How should we interpret this number?
How about with a letter grade?
If we assign letter grades “on a curve” this means assuming that they follow a normal distribution. When doing this, above the mean is a “B” in the 50th through 83rd percentiles, and below the mean in the 17th through 49th percentiles is a “C”, with other letter grades further out in the tails. Done this way, the range for a “C” is 1.6% to 3.5%, putting 4th quarter growth in the top half of the “C’s”.
But … you may have noticed that school is not like that in real life: grade inflation has made the idea that a “C” is “average” quaint at best, and as near as I can figure offensive to students with more self-esteem than ability.
Anyway, several years ago I obtained the grade distribution for all grades assigned at SUU for an entire semester. On this scale, the A’s extend much lower than the 84th percentile, and the B’s much lower than the 50th percentile. In fact, the range for a “B” for real GDP growth, if they are assigned in the same proportion as grades at SUU is 1.6% to 3.2%, making 4th quarter growth a high “B”.