Rapid recovery elusive despite strong quarter
WASHINGTON – The U.S. economy grew in the fourth quarter of 2009 at the fastest pace in six years, the government reported Friday, but many economists and business owners remained unconvinced that a full-scale recovery was under way and that substantial job growth would soon follow.
The nation’s total production of goods and services expanded at a heady 5.7 percent annual rate in the final three months of last year, the Commerce Department said in its first estimate of the quarter’s gross domestic product. That’s more than double the 2.2 percent GDP growth in the third quarter and a dramatic turnaround from the first three months of 2009, when the economy was mired in deep recession and GDP shrank by 6.4 percent at an annual rate.
Even so, economists believe most of the fourth-quarter growth was driven by temporary factors – cyclical inventory changes and government stimulus – that are likely to fade in the middle of 2010. And it remains to be seen whether private investments and particularly consumer spending – which accounts for about 70 percent of U.S. economic activity – can pick up enough of the slack to sustain a solid recovery.
“I personally think it’s somewhat of a blip,” said Darlene Miller, president of Permac Industries, a precision-machine manufacturer in Burnsville, Minn., just outside Minneapolis. Miller’s 35-employee company manages the inventories of companies in various industries. She said the strong fourth-quarter GDP was exactly in line with what she saw: Her customers, who had slashed their stock of goods drastically during the recession, were now starting to produce more and return to normal inventory levels.
“But what I’m hearing is we’re going to continue to see this in the first quarter, maybe the first half, and then go back down again,” she said. “As much as entrepreneurs would love to believe we are on an upswing, I don’t think anybody is convinced.”
Kathy Bostjancic, a senior economic adviser at the Conference Board, agreed. “It’s a nice improvement compared to the depths of the recession,” she said of the Commerce report. “But still, these (data) are not indicating that businesses are at a point where they are going to let up on the spending reins and do a lot of meaningful hires.”
Some economists were more optimistic about the outlook, saying that economic growth, while almost certain to slow down from the sizzling fourth-quarter rate, will continue to benefit from the expansive fiscal and monetary policies for most of this year.
“The recovery does appear to have staying power in 2010, and it could very well be stronger than the slow pace initially anticipated,” said Lynn Reaser, president of the National Association for Business Economics.
President Barack Obama, acutely aware of the mood of the nation as it continues to struggle with double-digit unemployment, pledged in his State of the Union address this week to make the economy and jobs his top priority.
Analysts say that in order to generate hundreds of thousands of new jobs a month to drive down the unemployment rate, economic growth will need to run at least 3 percent for some quarters. Many economists are forecasting growth of about 3 percent for this year.