Slow US growth fails to create jobs
By Jeannine Aversa |
May 28, 2010, Friday
|
Print Edition
Print Edition
THE economic rebound in the United States last quarter turned out to be slower than first thought, one of the reasons US unemployment is likely to stay high this year.
The economy grew at a 3 percent annual rate from January to March, the US Commerce Department said yesterday. That was slightly weaker than an initial estimate of 3.2 percent a month ago.
Consumers spent less than first estimated. Same goes for business spending on equipment and software. And, the nation's trade deficit was a bigger drag on economic activity.
In a separate report, the US Labor Department said the number of newly laid off workers filing claims for unemployment benefits fell by 14,000 to 460,000 last week. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.
The latest level of claims is slightly higher than it was at the start of the year. That shows the nation's workers are still facing tough times even though the economy is growing.
"We're out of recession, but the recovery is not going to bring a whole lot of smiles," said Joel Naroff, of Naroff Economic Advisors. "At this pace of economic growth, it will take a long time to bring the unemployment rate down to more reasonable levels."
During normal times, growth in the 3 percent range would be considered healthy. But with the country coming out of a long and deep recession, economic growth needs to be a lot stronger - two or three times the current pace - to make a big dent in the nation's 9.9 percent unemployment rate.
Economists say it takes about 3 percent growth to create enough jobs just to keep up with the population increase.
Growth would have to be about 5 percent for a full year just to drive the unemployment rate down 1 percentage point.
After the last severe recession in the 1980s, GDP grew at rates of 7 to 9 percent for five quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.
Economists don't see that happening this year. In fact, growth in the first quarter was slower than at the end of last year. The economy grew at 5.6 percent in the final three months of 2009. But economists had predicted that growth spurt would fade.
The National Association for Business Economics predicts moderate economic quarterly growth in the 3 percent range through the rest of this year. The outlook means employers won't feel comfortable about bulking up their work forces.
Consumers increased spending at a 3.5 percent pace in the first three months of this year.
Even though that was a notch less than the 3.6 percent initially estimated, it still marked the strongest spending in three years.
Consumer spending was feeble in the final three months of last year, rising at only a 1.6 percent pace.
Although consumers are now helping to support the recovery, they aren't showing signs of spending lavishly as they usually do in the early stages of economic rebounds.
The economy grew at a 3 percent annual rate from January to March, the US Commerce Department said yesterday. That was slightly weaker than an initial estimate of 3.2 percent a month ago.
Consumers spent less than first estimated. Same goes for business spending on equipment and software. And, the nation's trade deficit was a bigger drag on economic activity.
In a separate report, the US Labor Department said the number of newly laid off workers filing claims for unemployment benefits fell by 14,000 to 460,000 last week. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.
The latest level of claims is slightly higher than it was at the start of the year. That shows the nation's workers are still facing tough times even though the economy is growing.
"We're out of recession, but the recovery is not going to bring a whole lot of smiles," said Joel Naroff, of Naroff Economic Advisors. "At this pace of economic growth, it will take a long time to bring the unemployment rate down to more reasonable levels."
During normal times, growth in the 3 percent range would be considered healthy. But with the country coming out of a long and deep recession, economic growth needs to be a lot stronger - two or three times the current pace - to make a big dent in the nation's 9.9 percent unemployment rate.
Economists say it takes about 3 percent growth to create enough jobs just to keep up with the population increase.
Growth would have to be about 5 percent for a full year just to drive the unemployment rate down 1 percentage point.
After the last severe recession in the 1980s, GDP grew at rates of 7 to 9 percent for five quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.
Economists don't see that happening this year. In fact, growth in the first quarter was slower than at the end of last year. The economy grew at 5.6 percent in the final three months of 2009. But economists had predicted that growth spurt would fade.
The National Association for Business Economics predicts moderate economic quarterly growth in the 3 percent range through the rest of this year. The outlook means employers won't feel comfortable about bulking up their work forces.
Consumers increased spending at a 3.5 percent pace in the first three months of this year.
Even though that was a notch less than the 3.6 percent initially estimated, it still marked the strongest spending in three years.
Consumer spending was feeble in the final three months of last year, rising at only a 1.6 percent pace.
Although consumers are now helping to support the recovery, they aren't showing signs of spending lavishly as they usually do in the early stages of economic rebounds.
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