GDP Is Growing, Will Jobs Follow?
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It may not have felt like it, but it turns out that the U.S. economy grew at a much faster pace during the last three months of 2009. The Commerce Department said yesterday that the nation's growth rate hit 5.7 percent - the fastest increase in six years. As NPR's Jim Zarroli reports, part of the surge was due to what economists call an inventory correction.
JIM ZARROLI: Last year turned out to be the worst year for the U.S. economy since 1946. It shrank by 2.4 percent. But here's the good news: the downturn occurred in the first half of the year. Lakshman Achuthan of the Economic Cycle Research Institute says growth was up sharply by the second half of the year, and he says the 5.7 percent growth rate during the last quarter means the economy entered this year on a pretty strong rebound.
Mr. LAKSHMAN ACHUTHAN (Economic Cycle Research Institute): Clearly it's a good number. It shows that the recovery has been gaining speed as we have been debating whether or not it even exists.
ZARROLI: There was an important qualification in yesterday's number. U.S. companies had cut back production so fast earlier in the year that by the fall they no longer had enough goods to sell, so they had to start churning out more products just to restock their shelves. Much of the increase in production was simply an effort to play catch-up, says Brian Bethune, chief U.S. financial economist at Global Insight.
Mr. BRIAN BETHUNE (Chief U.S. Financial Economist, Global Insight): Basically, they're producing at a higher rate than what they're selling so that some of the product goes into inventories.
ZARROLI: The problem is that companies won't keep producing at that same fast rate unless consumers and businesses increase their buying as well.
There's some evidence that's already happening. Consumer spending was up at an annual rate of 2 percent during the fourth quarter. Business investment and exports was up. Achuthan says that's good but he says it won't make up for the damage that's been done not the economy over the past two years.
Mr. ACHUTHAN: The problem is that we lost so much during this recession. We lost over seven million jobs, a lot of GDP loss, a lot of wealth loss. And the amount of time it will take to recover that is going to be years.
ZARROLI: There's also the worry that growth will slow down once federal government stimulus programs end. Still, Achuthan says yesterday's report is clear evidence that the economy is mending. He describes the economy right now this way: It's like falling into the deep end of a swimming pool and kicking off from the bottom. You're traveling very quickly, he says, but there's that moment of anxiety about whether you'll reach the surface.
Jim Zarroli, NPR News, New York.