Is the U. S. Economic Recovery Finally for Real? Consumer spending that rose at the fastest pace in three years helped the U.S. economy grow at a 3.2 percent pace in the fourth quarter, overcoming government cutbacks and laying the foundation for a stronger expansion. The rate of growth in the world’s largest economy followed a 4.1 percent advance in the prior three months, Commerce Department figures showed today in Washington. Household purchases climbed at a 3.3 percent pace, the best performance since the end of 2010. The pickup in demand was broad based as business investment and exports also accelerated, overshadowing the damage from the 16-day partial shutdown of federal agencies and budget cuts. Diminishing fiscal restraint this year and progress in the labor market will probably sustain economic growth, which explains why the Federal Reserve decided to pare stimulus. Jobless claims climbed by 19,000 to 348,000 in the period ended Jan. 25, which included the Martin Luther King holiday. The reading was the highest since mid-December. The data are sometimes difficult to seasonally adjust during holiday weeks, although a Labor Department spokesman said there was nothing unusual in the figures. For all of 2013, the U.S. economy expanded 1.9 percent after a 2.8 percent increase in the prior year. My guess is that the U.S. economy will continue to grow but the real question is at what growth rate? 2.5 to 3% isn’t high enough to mitigate in an acceptable period of time, all of the collateral damage engendered by the recession. We really need to see growth of 4 to 5% per annum for a several years to get unemployment down to the long-term historic average. Also a higher growth rate is needed to generate higher tax revenues, which are needed to reduce the high national deficit. Let us hope that an uptick occurs sooner rather than later for everyone’s sake.
Posted on: Fri, 31 Jan 2014 15:10:02 +0000
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