December 7, 2024

Economic Growth Remain Subpar but Resilient

WASHINGTON (AP) — The American economy grew at a faster rate at the end of last year than previously estimated, providing evidence that growth might have accelerated in early 2013 despite higher taxes and cuts in government spending.

The nation’s gross domestic product grew at an annual rate of 0.4 percent in the October-December quarter, the Commerce Department said on Thursday, slightly better than the previous growth estimate of 0.1 percent. The revision reflected stronger business investment and export sales.

Analysts say they think the economy is growing at a rate of around 2.5 percent in the current January-March quarter, which ends this week.

Steady hiring has kept consumers spending this year. A rebound in company stockpiling, further gains in housing and more business spending also likely drove faster growth in the first quarter.

The 0.4 percent growth rate for the gross domestic product, the economy’s total output of goods and services, was the weakest quarterly performance in almost two years and followed a much faster 3.1 percent increase in the third quarter. The fourth quarter was hurt by the sharpest fall in military spending in 40 years.

For all of 2012, the economy grew 2.2 percent, after a 1.8 percent increase in 2011 and a 2.4 percent gain in 2010. Since the recession ended in mid-2009, the economy has expanded at subpar rates as a string of problems including higher gas prices and Europe’s debt crisis has acted as a drag on the United States economy.

Growth appears to be strengthening this year even after taxes increased on Jan. 1 and automatic government spending cuts totaling $85 billion started to take effect on March 1. The Congressional Budget Office has estimated that the combination of tax increases and spending cuts could trim economic growth this year by about 1.5 percentage points. The office is predicting just 1.5 percent growth for 2013.

But the economy is showing signs of holding its own against the fiscal drag.

Employers have added an average of 200,000 jobs a month since November. That helped reduce the unemployment rate in February to 7.7 percent, a four-year low.

The number of Americans seeking unemployment benefits did rise by 16,000 last week, the second straight weekly increase. But the longer-term trend in layoffs remained consistent with an improved job market.

Applications rose to a seasonally adjusted 357,000 for the week ending March 23, the Labor Department said Thursday. That is an increase from 341,000 the previous week, which was revised slightly higher.

The four-week average, a less volatile measure, rose 2,250 to 343,000. Even with the gain, the average is only slightly higher than the five-year low of 340,750 attained the previous week. Economists pay closer attention to the four-week average because it smooths out week-to-week fluctuations.

The total number of people receiving some kind of unemployment aid is also down sharply. Nearly 5.5 million people were receiving unemployment aid as of the week ended March 9, the latest data available. That figure is up roughly 87,000 from the previous week but still well below the 7.2 million of a year earlier.

The government will release its initial look at first-quarter growth on April 26.

Article source: http://www.nytimes.com/2013/03/29/business/economy/unexpectedly-jobless-claims-inch-up.html?partner=rss&emc=rss