October 29, 2009 in Business

Stimulus moving nation’s economy

But forecasters expect GDP number won’t be enough to spur new hiring
Don Lee Tribune Washington Bureau

Some jobless rates down

The unemployment rate fell in September in most metro areas for the second straight month, although that’s largely because more people gave up on job searches than found new work.

The September unemployment rate fell in 223 of 380 metro areas, or about 59 percent. The rate rose in 123 metro areas and was unchanged in 34.

But in many cases the drops resulted from discouraged workers leaving the labor force, perhaps to return to school. Once jobless workers stop looking for work, they are no longer counted in the unemployment rate.

WASHINGTON – The government is expected to report today that the U.S. economy resumed growing in the third quarter, which would mark an end to the worst economic contraction since World War II.

Even though some economists say the report should dispel any doubts that the downturn is over, it may be cold comfort to workers and businesses.

Forecasters say third-quarter growth was likely 3 percent to 3.5 percent at an annual rate, driven largely by the federal stimulus. Although solid, that is not the kind of breakthrough turnaround needed to reverse the decline in gross domestic product last fall and winter. GDP declined at a 5.4 percent rate in the fourth quarter and 6.4 percent in the first quarter and has fallen for four consecutive quarters.

If the new GDP number falls in the expected growth range, it will not be big enough to spur significant new hiring, experts said. And forecasters generally think the fourth quarter and much of next year will see more anemic growth rates.

Not until the middle of next year, at the earliest, is the economy expected to gather enough momentum to put a meaningful dent in the nation’s high unemployment rate.

Adding to skepticism about what the growth uptick will mean was Wednesday’s report showing new-home sales dropped in September. The report prompted Goldman Sachs to downgrade its expectations for third-quarter GDP growth to 2.7 percent, from 3 percent.

A revival in the home-building industry was seen as positive for the economy in the third quarter. The housing market has been boosted by the government’s $8,000 tax credit for first-time homebuyers, a program that is set to expire at the end of November.

Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email