WASHINGTON – The weakest quarter for the U.S. economy in nearly two years may end up being a temporary lull.
Economists think growth has begun to pick up on the strength of a sustained housing recovery and a better job market.
The economy grew at an annual rate of just 0.1 percent from October from December, a government report Thursday showed. Thats only slightly better than the Commerce Departments previous estimate that the economy shrank at a rate of 0.1 percent. And its down from the 3.1 percent annual growth rate in the July-September quarter.
Economists said the weakness last quarter was caused by steep defense cuts and slower company restocking, which are volatile. Residential construction, consumer spending and business investment – core drivers of growth – all improved. Steady job growth will likely keep consumers spending, despite higher Social Security taxes.
Analysts think growth is picking up in the January-March quarter to a roughly 2 percent annual rate. The only impediment may be the across-the-board government spending cuts that kick in today – especially if those cuts remain in place for months.
I continue to have some optimism about the economy despite the efforts of Washington to kill it, because the labor market continues to improve, said Joel Naroff, chief economist at Naroff Economic Advisers
The latest indication of the job markets strength came Thursday in a government report that the number of Americans seeking weekly unemployment benefits fell 22,000 last week to a seasonally adjusted 344,000.
Applications for unemployment have fallen steadily in recent months. The four-week average has declined nearly 11 percent since November. At the same time, employers added an average of 200,000 jobs a month from November through January. That was up from about 150,000 in the previous three months.
More jobs and ultralow mortgage rates are helping the once-battered housing market recover. New-home sales jumped 16 percent to their highest level in 4 1/2 years in January.
At the same time, the number of new homes available for sale remains near record lows. That means builders will likely have to start construction on more homes and apartments to keep up with demand, creating new jobs.
Naroff thinks the economy could grow at an annual rate of 2 percent in the first quarter of 2013 and an even better rate of 4 percent in the April-June quarter.