Economy grew slightly faster 1.9 pct. in Q1
WASHINGTON (AP) — The U.S. economy expanded a little faster at the beginning of the year than previously estimated. But the pace was still anemic and economists don't see that changing much in the coming months.
The Commerce Department says the economy grew at a 1.9 percent annual rate in the January-March quarter. That's not much better than the 1.8 percent rate estimated a month ago. The small upward revision reflected stronger exports and more business spending on stockpiles.
High gas prices were a major reason growth slowed and the drag has carried over into the spring. The economy is growing in the current April-June quarter at a rate of about 2.3 percent, according to an Associated Press survey of 38 top economists.
Economic growth must be stronger to make a noticeable dent in unemployment, which was 9.1 percent last month. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.
The economists surveyed by the AP expect growth for the entire year to be around 2.6 percent, down from 2.9 percent in 2010. The Federal Reserve acknowledged the slowdown this year, issuing an updated forecast on Wednesday that put growth this year in a range of 2.7 percent to 2.9 percent.
The spike in gas has forced consumers to spend less on discretionary items that help boost the economy, such as appliances, vacations and furniture. Consumer spending is important because it makes up 70 percent of economic activity.
Government budget cuts, weaker-than-expected consumer spending, still-high unemployment and the continued troubles in housing have also been weighing on the economy.
The economy has grown at a pace of about 2.8 percent in the two years since the recession officially ended. That's just about half the rate that would have been expected coming out of such a deep downturn.
Federal Reserve Chairman Ben Bernanke warned that some problems, such as the weak housing market, could persist into next year. Under the Fed's forecast, growth would improve in the second half of this year but many private economists believe the central bank, even with its downgrade, is being too optimistic.
As a result, the Fed raised its unemployment rate estimate slightly, saying it would not fall below 8.6 percent this year.
The nation will add only about 1.9 million jobs this year and the unemployment rate will fall to only 8.7 percent, according to the AP Economy survey. The economy needs to generate at least 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate, which rose to 9.1 percent in May.
Employers added only 54,000 net new jobs in May, much slower than the average gain of 220,000 per month in the previous three months.