Monday, February 01, 2010

4th Quarter's Fast Economic Pace Likely to Wane

According to the Associated Press, the economy expanded at a rate of 5.7% during the fourth quarter of 2009. This was the second consecutive quarter of growth, but economists warn that this rate of growth will not likely continue.

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.

Continued at Yahoo Finance…

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