Growth Rate of Economy Slows /But gains in GDP fuel optimism
By Randi F. Marshall
STAFF WRITER
January 31, 2004
As both consumers and businesses put the brakes on spending, the U.S. economy grew at a 4 percent clip in the fourth quarter of 2003, far slower than its previous quarter.
But the gains in gross domestic product, often considered the best measure of overall economic activity, still buoyed analysts, who said the growth could sustain and build upon an economic recovery. Indeed, in all of 2003, the economy expanded by 3.1 percent, the best performance since 2000.
"The reality is that growth is still strong. There's really little doubt about that," said Commerce Bank chief economist Joel L. Naroff.
White House officials also applauded the growth, attributing it to the Bush administration's efforts.
Yet, the gains, reported by the U.S. Commerce Department Friday, were disappointing to some, who pointed to the third quarter's 8.2 percent growth, and forecasts of fourth-quarter gains near 5 percent.
And experts are still awaiting recovery in the labor market, noting that the GDP gains mean little if they aren't accompanied by job growth.
"The bottom line is, regardless of today's GDP number, until the economy is generating new jobs we simply don't have enough growth," said Bill Cheney, chief economist with John Hancock Financial Services in Boston. "My faith that the labor market will be picking up soon keeps being tested."
The report on January employment is due to come out Friday, and many economists are expecting the nation to have gained 150,000 jobs. But in December, with similar forecasts on the line, the nation added just 1,000 jobs. Some experts noted that little of the nation's fourth-quarter growth came from the labor market. Personal consumption increased by just 2.6 percent, after growing by 6.9 percent in the third quarter. In an indication that wages aren't growing, real disposable personal income - after-tax income, adjusted for inflation - declined in the fourth quarter - by 0.5 percent, compared with a 6.3 percent increase in the third quarter.
"Too many households are feeling the brunt of this weak labor market," said economist Jared Bernstein, with the Economic Policy Institute, a Washington, D.C.-based liberal think tank. "It's the one sector of the economy that hasn't really lined up."
There were, however, some more positive economic signs Friday. The weak dollar helped spur exports, which rose 19.1 percent in the fourth quarter, compared with 9.9 percent in the prior quarter.
And in New York, business activity continued to grow quickly, according to the index of the National Association of Purchasing Managers-New York. The index reached 79.4 in January, just under December's high of 80.7.
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