August 6, 2021

U.S. Recovery Slowly Gained Speed in Late ’11, Data Show

The pace of growth was faster than in the third quarter, when gross domestic product expanded at an annual rate of 1.8 percent.

Even so, both  figures were below the average speed of economic expansion in the United States since World War II. Above-average growth in the quarter would have helped to make up for the destruction wrought by the Great Recession.

“At this rate, we’ll never reduce unemployment,” said Justin Wolfers, an economist at the University of Pennsylvania. “The recovery has been postponed, again.”

Still, the 2.8 percent rate is likely to be seen by many as something of a relief, given that just last summer many economists were predicting the country would soon dip back into recession. Whether this modestly brisker pace of growth will continue is unclear, however.

One of the biggest drags on growth in the last quarter was government spending at the federal, state and local levels, according to the Commerce Department report. National defense spending fell a whopping 12.5 percent, for example. Strapped state and local governments are likely to continue cutting back in 2012, as they have done nearly every quarter for the last several years.

At the federal level, Congress has not yet decided whether to renew a temporary payroll tax cut and extended unemployment benefits past February, when both are scheduled to expire.

Consumer spending rose at an annual pace of 2 percent, slightly better than the 1.7 percent in the previous quarter. But there were signs that the increase in spending might have been driven by borrowing based on expected improvements in the economy and that consumers were starting to retrench again.

“It will be very hard for consumption growth this quarter to match what we saw last quarter,” said Paul Ashworth, chief United States economist at Capital Economics. “Remember that with consumption at 70 percent of G.D.P., slower consumer spending growth can mean much slower G.D.P. growth.”

Among the more optimistic signs recently, many American companies have reported strong profits in recent months. In addition, new orders for manufactured durable goods, reported on Thursday, exceeded economists’ expectations in December by growing 3 percent.

And companies like General Electric and Lockheed Martin closed the year with record order backlogs, a sign that, at least for some businesses, demand is so strong that they cannot produce quickly enough. The backlogs portend solid manufacturing growth going forward, and suggest to some economists that the United States could weather the European sovereign debt crisis relatively unscathed after all.

On the other hand, so far in this recovery, corporate success has not necessarily benefited American workers and consumers. Today, the economy produces more than it did when the recession began in 2007, but it manages to do so with six million fewer jobs.

Companies seem reluctant to use their burgeoning profits to invest in new workers.

“Businesses have been holding much higher levels of cash than they have in past,” said Conrad DeQuadros, senior economist at RDQ Economics.

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