WASHINGTON – The economy grew late last year at a pace that in normal times would suggest it’s healthy.

But the 2.8 percent annualized growth rate in the October-December quarter – the fastest pace since the spring of 2010 – isn’t being cheered by most economists or investors. That’s because growth would need to be much stronger to sharply reduce unemployment. And signs in the data point to slower growth ahead.

For all of last year, the economy grew just 1.7 percent. That was barely more than half the growth in 2010. The outlook for all 2012 is slightly better. The Federal Reserve estimates growth of roughly 2.5 percent for the year.

Though the economy has picked up and is far stronger than during the Great Recession, unemployment is still a high 8.5 percent. Many people remain reluctant to spend more or buy homes.

Many employers are still hesitant to hire.

For the final three months of 2011, Americans spent more on vehicles, and companies restocked their shelves at a robust pace.

But overall growth last quarter – and for all of last year – was held back by the sharpest cuts in annual government spending in four decades, the Commerce Department said Friday.

Several factors are expected to exert more of an economic drag this year: Cuts in military and other federal spending. A slower pace of company restocking. Weak or flat pay increases.

Sluggish growth in consumer spending.