Economic growth surged 3.2% in 1st quarter
By Jeannine Aversa
WASHINGTON — The numbers would be excellent in normal times, but for a country recovering from deep recession, they're not enough.
Spending by consumers rose by the fastest pace in three years, helping the economy grow at an annual rate of 3.2 percent in the first quarter of the year, the Commerce Department said yesterday. It marked the third straight quarterly gain as the nation heals from the longest and deepest recession since the 1930s.
That has not been enough, however, to ignite a recovery capable of driving down the jobless rate, which has been stuck at 9.7 percent since January and is not expected to dip significantly for months.
"The recovery is slowly gaining traction, but it's not growing fast enough now to bring down unemployment and let ordinary Americans feel like they are finally off and running," said Mark Zandi, chief economist at Moody's Analytics.
Economists say it takes about 3 percent growth in gross domestic product to create enough jobs just to keep up with population growth. Growth would have to be about 5 percent for a full year just to drive the unemployment rate down by 1 percentage point.
After the last severe recession in the early 1980s, GDP grew at an annual rate of 7 percent to 9 percent for five straight quarters, and the unemployment rate plunged from 10.8 percent to 7.2 percent in 18 months.
Economists don't see anything like that happening this year or the next. In fact, growth in the first quarter was weaker than in the fourth quarter of last year, when the economy grew at a 5.6 percent rate.
Facing the prospect of 9 percent unemployment leading into the November congressional elections, President Obama called the GDP report an "important milepost on the road to recovery" but acknowledged that the economy must create more jobs.
Many economists think it will take until at least the middle of the decade to lower the unemployment rate to a more normal 5.5 percent to 6 percent range.
Consumers increased their spending at an annual rate of 3.6 percent in the first quarter. It was the strongest showing since early 2007 — before the Great Recession. And it marked a big improvement from the fourth quarter, when spending grew at a lackluster 1.6 percent pace.
Americans spent more on home furnishings and household appliances, recreational goods and vehicles and clothing. They also spent more at bars and restaurants.
Analysts, however, say consumers will be wary of stepping up spending much further. The high unemployment rate, sluggish wage growth and a reluctance or inability to borrow probably will limit spending, they say.