4th quarter GDP growth advance estimate: 5.7% growth

[bpwallace49]

4th quarter's fast economic pace likely to wane

4th quarter's fast economic pace likely to fade as joblessness holds back consumer spending

 

WASHINGTON (AP) -- The economy boomed at the end of 2009, growing at the fastest rate in more than six years. Now if only it could keep it up.

 

The economy expanded at an annual rate of 5.7 percent in the fourth quarter, the second straight quarter of growth. But analysts warn it's unsustainable.

 

Consumer spending, chilled by double-digit unemployment and scant wage gains, remains weak. And the benefits of government aid and higher company output to feed stockpiles will dwindle.

 

Many analysts predict gross domestic product will expand at a rate closer to 2.5 to 3 percent in the current quarter and 2.5 percent or less for the year.

 

That won't be enough to significantly reduce the unemployment rate, now 10 percent. In fact, most analysts expect the rate to keep rising for months and to remain close to 10 percent through year's end.

 

To drive down the jobless rate by just 1 percentage point this year, the economy would have to grow by 5 percent for the whole year. No one thinks that will happen.

 

Until companies step up hiring and raise pay, consumers will feel squeezed. For all of last year, workers' compensation rose by the smallest amount on records going back more than a quarter-century.

 

"Consumers are walking, not running," said Ken Mayland, president of ClearView Economics.

 

Roughly two-thirds of the quarter's growth came from increased manufacturing as businesses drew down their stockpiles of goods at a slower rate. But companies will eventually let those inventories fall again unless consumers -- who account for about 70 percent of the economy -- spend more.

 

Unlike past rebounds driven by the spending of ordinary shoppers, this one appears to hinge on spending by businesses, foreigners and -- until it runs out -- government stimulus.

 

History suggests this isn't the recipe for a strong recovery. In the early 1980s, businesses led a recovery from recession. Their inventory building accounted for 74 percent of growth in the first quarter of 1981.

 

But then the economy contracted. A drop in inventories was a key reason why. The economy fell into a second, more severe recession in 1981 and 1982. The unemployment rate hit 10.8 percent, the post-World War II high.

 

Is another "double-dip" recession likely now?

 

Economists say the possibility is low. Businesses are expected to spend enough to at least sustain the recovery even as the benefits of government stimulus and inventory replacement diminish. But the risk remains. Some fear growth could slow sharply or even stall later this year as the government winds down its $787 billion stimulus package of tax cuts and increased spending.

 

"That's why there's so much hand-wringing right now," said Brian Bethune, chief U.S. financial economist for IHS Global Insight. "Can the economy really sustain this? That's the big question mark sitting out there."

 

The economic weakness poses a threat to President Barack Obama's Democratic Party heading into congressional elections this fall. Obama on Friday urged Congress to move ahead on tax incentives to create jobs, calling the 7.2 million of them wiped out by the recession, "a terrible human tragedy."

 

Even companies like Procter & Gamble Co., maker of consumer staples like Tide laundry detergent and Pampers diapers, are confronting the reality of reluctant shoppers. The company expects sales growth to return to pre-recession levels in the coming quarter -- but in part because it's yielding to frugal shoppers, cutting prices on some of its premium products.

 

Business spending on equipment and software last quarter grew at the fastest pace since early 2006. Economists think such spending will continue rising, though at a slower pace.

 

Consumer spending is also expected to creep ahead -- aiding the recovery but not leading it.

 

Many consumers are spending more freely on souped-up cell phones, electronic-book readers and sleeker computers.

 

Rising demand for iPhones and Macintosh computers powered Apple Inc. to its most prosperous quarter in its 33-year history, and sales are expected to rise again during the first three months of the year. Intel Corp., the world's biggest maker of computer microprocessors, and Microsoft Corp., the leading maker of computer software, are forecasting renewed household and business spending on personal computers.

 

Still, the overall news for 2009 wasn't good.

 

Friday's report showed economic activity for the year fell by 2.4 percent -- the sharpest drop since 1946. It was the first annual decline since 1991.

 

If gains from inventories and exports are taken out, the economy last quarter grew at just a 1.7 percent pace.

 

But the fourth-quarter's pickup did benefit companies across the supply chain.

 

Ford Motor Co. this week reported higher fourth-quarter sales and its first annual profit in four years, as it recovers from the devastating downturn the auto industry.

 

Ford's "recent success has benefited us," said Tom Schumann, general manager of EC Kitzel & Sons Inc., a small cutting tool fabricator based in Cleveland, Ohio.

 

The company, which has 30 employees, bought a new machine tool in December and hired a new worker to run it, the company's first hire since last spring. Still, many of the company's suppliers are struggling.

 

"I'm not totally convinced we're out of the woods yet," Schumann said, referring to the economy.

 

AP Economics Writer Martin Crutsinger in Washington, AP Technology Writer Michael Liedtke in San Francisco and AP Business Writer Dan Sewell in Cincinnati contributed to this report.

 

 

On an aside, how does everyone think that the gubment can create jobs when a lot of them have been completely eliminated?

[westvirginia]

 

On an aside, how does everyone think that the gubment can create jobs when a lot of them have been completely eliminated?

 

The gov't can't create jobs. To create jobs, an entity has to PRODUCE something of value. The gov't has nothing it doesn't first take from some one else. That's why I say the gov't can't really help the economy - it can only harm it to varying degrees.

[bpwallace49]

The gov't can't create jobs. To create jobs, an entity has to PRODUCE something of value. The gov't has nothing it doesn't first take from some one else. That's why I say the gov't can't really help the economy - it can only harm it to varying degrees.

 

That is my point. Everyone is bashing Obama for not "creating" more jobs. Outside of hiring more gubment workers (which is counter productive long term) how does anyone think he can do that?

 

By re-investing in infrastructure that can hire construction workers makes sense, but it is short term (actually now when I think how bad and slowly the roads get fixed in Chicago those jobs could last awhile . .. )

 

Tax breaks for businesses can only stretch so far as well, especially with more and more companies moving off-shore and outsourcing.

 

Is is development for "green" jobs the next bubble/job creation vehicle?

[Perchoutofwater]

That is my point. Everyone is bashing Obama for not "creating" more jobs. Outside of hiring more gubment workers (which is counter productive long term) how does anyone think he can do that?

 

By re-investing in infrastructure that can hire construction workers makes sense, but it is short term (actually now when I think how bad and slowly the roads get fixed in Chicago those jobs could last awhile . .. )

 

Tax breaks for businesses can only stretch so far as well, especially with more and more companies moving off-shore and outsourcing.

 

Is is development for "green" jobs the next bubble/job creation vehicle?

 

I don't fault Obama for not creating jobs. I think it was foolish of him to say he could or would, but I never had any doubt the government would not create jobs. The best thing Obama could do is get out to the way, and by that I mean tell business owners we aren't going to introduce any new taxation or regulation that will impede your growth until such time a unemployment is down to 6% nationally. The health care debacle is hurting everyone from salesmen and bankers to construction workers, as hospitals are momentarily having their own spending freeze as they wait to see how much Washington is going to take form them whether it be from taxation or the cost to conform to regulations. If health care is 1/6 of the economy you can imagine 1/6 of the economy now really drawing in their purse strings. It is happening in businesses across the board as their owners wait to see what government is going to do to them.

 

You state that tax breaks for businesses only stretch so far with more companies moving over seas, my question to you is why are more companies moving over seas instead of growing and expanding here?

[bpwallace49]

You state that tax breaks for businesses only stretch so far with more companies moving over seas, my question to you is why are more companies moving over seas instead of growing and expanding here?

 

Isnt that self evident with labor costs alone? Plus with the fact that businesses across the board have eliminate jobs that probably will not be replaced immediately. In your industry, you obviously need to hire more people for more jobs . . right? So increased economic activity has a direct casual effect on your level of employees. With all the white collar jobs being eliminated and squeezing more productivity out of current employees, it has been widely published that even if the economy DOES turn around, a lot of companies will not rehire for some jobs that have been deemed unnecessary. It is like most of corporate America jot a vistsit from the "two Bob's" in Office Space and made themselves more efficient.

 

yet strangely enough . . . the insurance market seems to be doing juuust fine during all this health care stuff. At least from people I know that sell the stuff and the amounts my work gets charged . . .

[Perchoutofwater]

Isnt that self evident with labor costs alone?

 

Isn't that a result of the artificially high wage rate forced onto businesses by the government and unions?

[bpwallace49]

Isn't that a result of the artificially high wage rate forced onto businesses by the government and unions?

 

Cmon perch . . you and I both know this is a self-destructing argument before it even starts . .

 

yeah, it would be great . . for you . . if you could pay people a buck a day. Unfortunately, that just doesnt fly in todays society . . and you cant unring that bell.

 

After several e-mails with rockinrobin, I decline to get into unions at all.

 

Are you a unionized shop Perch?

[gbpfan1231]

Cmon perch . . you and I both know this is a self-destructing argument before it even starts . .

 

yeah, it would be great . . for you . . if you could pay people a buck a day. Unfortunately, that just doesnt fly in todays society . . and you cant unring that bell.

 

After several e-mails with rockinrobin, I decline to get into unions at all.

 

Are you a unionized shop Perch?

You decline to get into union talk and your next question is about unions. Way to hold back.

[Perchoutofwater]

Cmon perch . . you and I both know this is a self-destructing argument before it even starts . .

 

yeah, it would be great . . for you . . if you could pay people a buck a day. Unfortunately, that just doesnt fly in todays society . . and you cant unring that bell.

 

After several e-mails with rockinrobin, I decline to get into unions at all.

 

Are you a unionized shop Perch?

 

I rarely have to deal with unions. We purposefully stay out of the few areas around here that have a strong presence. BTW everyone I employ makes significantly more than minimum wage. Still you can't deny that it was government regulation and cowtowing to the unions that have made labor rates go so high as to make many position flee for less cost and less regulation. I would submit that there is very little real benefit associated with a minimum wage and some significant detractors as can be seen by the mass exodus of what were traditionally lower paying jobs as well as inflation. You are right, you probably can't unring that bell. My point is that anytime the government tries to get involved in the free market "for the good of the people" there are usually drastic unintended consequences. I still say if we never had Freddie and Frannie, we wouldn't have had the financial crisis, and to date has more money gone to AIG or to Freddie and Frannie? What about the big banks? Government intrusion in the free market just has way too many unintended consequences some of which are impossible to see for years or decades, that jump up and bite us on the ass.

[bpwallace49]

You decline to get into union talk and your next question is about unions. Way to hold back.

 

I did not offer an opinion on unions. I asked for a factual response, which is yes or no.

 

Please try to keep up . .. .

[bpwallace49]

I rarely have to deal with unions. We purposefully stay out of the few areas around here that have a strong presence. BTW everyone I employ makes significantly more than minimum wage. Still you can't deny that it was government regulation and cowtowing to the unions that have made labor rates go so high as to make many position flee for less cost and less regulation. I would submit that there is very little real benefit associated with a minimum wage and some significant detractors as can be seen by the mass exodus of what were traditionally lower paying jobs as well as inflation. You are right, you probably can't unring that bell. My point is that anytime the government tries to get involved in the free market "for the good of the people" there are usually drastic unintended consequences. I still say if we never had Freddie and Frannie, we wouldn't have had the financial crisis, and to date has more money gone to AIG or to Freddie and Frannie? What about the big banks? Government intrusion in the free market just has way too many unintended consequences some of which are impossible to see for years or decades, that jump up and bite us on the ass.

 

Perch . . do think OSHA is a positive influence? How about anti-monopoly laws? Would you like it is some monopoly on hospital contructing set up shop by you and destroyed your business? How "free market" would you be then?

 

There are a lot of unnecessary regulations, and they def need to be gone through and streamlined. But to enjoy the benefits of the positives that directly apply to you while yelling about things that (while are still positive) dont directly affect you is kinda self serving . .isnt it?

 

Perch . . with construction unions, how can they flee out of the county like in your post? Arent they kinda needed where the construction is being done? cars can be made and shipped, and I stipulate that a lot of building MATERIALS can be outsourced, but how do you have a "mass exodus" in your industry? I think more of the mass exodus has to do with other manufacturing that is easiily shipped and jobs like telecommunications and IT work. Heck . . even a construction company can set up their "corporate headquarters" offshore to avoid paying taxes, right?

[Perchoutofwater]

Perch . . do think OSHA is a positive influence? How about anti-monopoly laws? Would you like it is some monopoly on hospital contructing set up shop by you and destroyed your business? How "free market" would you be then?

 

There are a lot of unnecessary regulations, and they def need to be gone through and streamlined. But to enjoy the benefits of the positives that directly apply to you while yelling about things that (while are still positive) dont directly affect you is kinda self serving . .isnt it?

 

Perch . . with construction unions, how can they flee out of the county like in your post? Arent they kinda needed where the construction is being done? cars can be made and shipped, and I stipulate that a lot of building MATERIALS can be outsourced, but how do you have a "mass exodus" in your industry? I think more of the mass exodus has to do with other manufacturing that is easiily shipped and jobs like telecommunications and IT work. Heck . . even a construction company can set up their "corporate headquarters" offshore to avoid paying taxes, right?

 

I view OSHA as a needless pain in the ass honestly. It may serve some use in manufacturing (I can't really speak to that), but in the construction industry there is really no need, as insurance companies or rates associated with not providing a safe workplace are deterrent enough, particularly in the litigious society in which we live now. If someone on one of my jobs dies or people are getting hurt due to my not providing a safe workplace or the proper personal protection gear my insurance modifier will quickly go through the roof. This will cause my insurance premiums to skyrocket and make me uncompetitive from not only a cost standpoint, but safety is something potential clients and workers look at as well before coming involved with construction company. The only people that might actually be helped by OSHA in the construction industry would be the guys working for the small time residential contractors which ironically don't fall under OSHA's purview. I guess my point is it is really needless. Like the unions at one time it may have served a useful purpose, but now it just adds cost to the job but no real benefit.

 

ETA: Every OSHA inspector I've seen is more concerned with making sure you have the paper work right than they are about actually reviewing the site for safety concerns. I'd also state some to the rules are next to impossible to abide by in some instances. Now I'd say either get rid of the lawyers or OSHA, but there is no need for both.

 

I'm not worried about monopolies and think government involvement does as much to hurt the "little guy" as theoretical monopoly would, as they can't afford a safety engineer like I can to make sure they have all their "i"s doted and "t"s crossed to avoid the fines for not properly filling out the paper work the bureaucracy requires. If a monopoly were to move in, I'd probably change my business structure, or sell my self to the liberals that hate "big business"

 

I wasn't really speaking of my industry but of the manufacturing and service industries that are moving over seas. And surprisingly it does have an impact on my industry as more and more materials are coming in from out of the country. You end up with some inferior products that are harder to have replaced, you also have stuff tied up in customs that wrecks havoc on schedules. I did a job a few years ago that the tile came from Italy. It was held up in customs for 13 weeks. It ended up delaying the completion of my project by two months. That is just one of probably a dozen examples I could give with out much thought.

Edited February 1, 2010 by Perchoutofwater

[Ursa Majoris]

For those that don't know, a "lost time" incident in the construction industry will wipe out a significant percentage of profit on that job, regardless of the longer term effects on insurance rates.

[The Irish Doggy]

I wasn't really speaking of my industry but of the manufacturing and service industries that are moving over seas. And surprisingly it does have an impact on my industry as more and more materials are coming in from out of the country. You end up with some inferior products that are harder to have replaced, you also have stuff tied up in customs that wrecks havoc on schedules. I did a job a few years ago that the tile came from Italy. It was held up in customs for 13 weeks. It ended up delaying the completion of my project by two months. That is just one of probably a dozen examples I could give with out much thought.

 

Wow. I've never had something held up by customs for more than 2 weeks. Was that Italian or US customs? What on earth were they saying was wrong?

[Perchoutofwater]

Wow. I've never had something held up by customs for more than 2 weeks. Was that Italian or US customs? What on earth were they saying was wrong?

 

We never could get a straight answer out of them. I've had it happen several times. I had some glass stuck at the US/Canada border for 9 weeks. I ended up putting plywood in the frames so that I could finish out the building in their absence. As you can imagine that cost me a pretty penny in both materials and labor. In every case it has been US customs.

[Azazello1313]

That is my point. Everyone is bashing Obama for not "creating" more jobs. Outside of hiring more gubment workers (which is counter productive long term) how does anyone think he can do that?

 

well I think the point is he took $800 billion of our money promising he would. if government stimulus can't really be effective (and I agree with you, read this), then maybe let's stop borrowing trillions of dollars from the future on the assumption that it can.

[bpwallace49]

well I think the point is he took $800 billion of our money promising he would. if government stimulus can't really be effective (and I agree with you, read this), then maybe let's stop borrowing trillions of dollars from the future on the assumption that it can.

 

Az . . did he say that 800 billion was just towards job creation? The point is that the right is clamoring for "job creatioon", Obama said he will focus on job creation . . . yet how does gubment do that without expanding gubment jobs

[Perchoutofwater]

Az . . did he say that 800 billion was just towards job creation? The point is that the right is clamoring for "job creatioon", Obama said he will focus on job creation . . . yet how does gubment do that without expanding gubment jobs

 

Get out of the way

[bpwallace49]

Get out of the way

 

Cause that has worked so well in the past?

 

No one has any idea how to create new jobs without having a market/industry to drive them like a housing or dot.com bubble. Is green resources the next "employment bubble"?

[Perchoutofwater]

Cause that has worked so well in the past?

 

No one has any idea how to create new jobs without having a market/industry to drive them like a housing or dot.com bubble. Is green resources the next "employment bubble"?

 

I know of at least 4 and possibly 5 projects that are on hold until health care is either reformed or dropped from the agenda. So, if he'd get out of the way jobs would be created. Make government as minimally intrusive as possible and you would see a lot more growth.

[bpwallace49]

I know of at least 4 and possibly 5 projects that are on hold until health care is either reformed or dropped from the agenda. So, if he'd get out of the way jobs would be created. Make government as minimally intrusive as possible and you would see a lot more growth.

 

Well then we could create jobs in the incredibly narrow field of hospital construction. That is one small industry down! Thousands of more to address!

 

What about the other 99.999999999% of Americans? I think that is the more pertinent issue. What is the next drver of the US economy that will foster growth? What indistries look to be emerging (other than green power) that will generate jobs?

[Perchoutofwater]

Well then we could create jobs in the incredibly narrow field of hospital construction. That is one small industry down! Thousands of more to address!

 

What about the other 99.999999999% of Americans? I think that is the more pertinent issue. What is the next drver of the US economy that will foster growth? What indistries look to be emerging (other than green power) that will generate jobs?

 

You do realize it isn't just the construction industry but people actually use the buildings, they don't just sit there. So, you would have more medical professionals, you'd also have more sale reps. You also have to think about the fact that these 4 to 5 projects would employ probably 150 people for 18 months. Those people actually spend money and pay taxes rather than collect unemployment and welfare checks.

[bpwallace49]

You do realize it isn't just the construction industry but people actually use the buildings, they don't just sit there. So, you would have more medical professionals, you'd also have more sale reps. You also have to think about the fact that these 4 to 5 projects would employ probably 150 people for 18 months. Those people actually spend money and pay taxes rather than collect unemployment and welfare checks.

 

So there are doctors and medical professionals just sitting there collecting unemployment Perch?

 

Jeez . . . it just isnt about your corner of the universe. It is about the big picture of the US economy. I doubt that building new hospitals forever is the answer . . .

[westvirginia]

Az . . did he say that 800 billion was just towards job creation? The point is that the right is clamoring for "job creatioon", Obama said he will focus on job creation . . . yet how does gubment do that without expanding gubment jobs

 

Yes, as a matter of fact. He said if they didn't do it, unemployment would rise to 10+% and if they did, only 8%. HIS words - saved or created.

[Perchoutofwater]

So there are doctors and medical professionals just sitting there collecting unemployment Perch?

 

Jeez . . . it just isnt about your corner of the universe. It is about the big picture of the US economy. I doubt that building new hospitals forever is the answer . . .

 

Not doctors, and not very many nurses, but definitely support staffs, and vendors all of whom spend money in stores and at restaurants, and pay taxes. Of course I think you know that and are just deliberately being myopic.