JONATHAN COHN JANUARY 28, 2011
It's a busy news day and I'm preoccupied with some reporting. So I'm going to outsource analysis of today's economic numbers to Catherine Rampell of the New York Times:
The gross domestic product, a broad measure of the goods and services produced in the country, grew at an annual rate of 3.2 percent in the fourth quarter, up from 2.6 percent in the previous period, according to a Commerce Department report released Friday.
Because of this slightly speedier expansion, the nation’s overall economic output has finally matched its peak before the recession. Still, given the millions of jobless American workers, the economy has fallen far short of what it could be if it were healthy, economists said.
“Things are better, but they’re not anywhere near where they need to be to make major inroads into unemployment,” said John Ryding, chief economist at RDQ Economics.
The economy has grown for six straight quarters, but it needs to grow faster to restore healthy job growth after the 2007-2009 recession. Encouraging growth in consumer spending fed the jump in final sales of goods and services. Previously, final sales were weak and businesses were building up inventories of unsold goods; that pattern reversed in the fourth quarter as final sales surged. ...
We already know that job creation in the fourth quarter was modest compared with the size of the jobs deficit that is the legacy of the 2007-2009 recession. But if sales remain strong and goods continue moving off the shelves, businesses may finally start to hire in earnest.
Of course, continued growth in demand requires that the Fed continues its policy of supporting the economic recovery and the Congress doesn’t do anything to undermine it, like immediately slashing government spending.