The U.S. economy is growing faster than expected, further evidence that the worst recession since the 1930s may be over. Yet financial analysts warn the nation still faces economic problems.
Wall Street cheered Friday following an upbeat fourth quarter report from the Commerce Department showing the U.S. economy grew at the fastest pace in more than six years. The 5.7 percent growth in GDP from October to December beat analyst expectations by more than one percent. Wells Fargo chief economist John Silva said, "For an economist it does reflect some underlying improvement in consumer spending and in business investment. And I think those two components probably will sustain the economy going forward."
Government officials still have not declared the recession officially over, but the GDP report marks the second quarter of expansion after a record four quarters of decline. Some analysts credit the government's massive stimulus programs for the improvement.
But Mark Zandi at Moody's Economy.com warns the recovery may be fragile. "I don't think the coast is clear. I don't think there's any guarantee that the recovery is going to evolve into a self sustaining economic expansion. The odds are that it will, but the odds are also uncomfortably high that it won't," he said.
Speaking at a panel discussion at the Urban Institute in Washington, Zandi cited the nation's double digit unemployment as reason for caution. "There is no evidence that businesses have started to hire yet and without hiring we can't get net job creation and without net job creation we won't have the income growth to support the consumer spending that is the fodder for a self sustaining economic expansion," he said.
Consumer spending accounts for about 70 percent of the U.S. economy and is closely linked to unemployment. But it tends to lag behind other indicators.
In a rare meeting with Republican Party lawmakers Friday, President Barack Obama decried the partisan politics of the past and urged both parties to work together on creating more jobs for Americans. "I don't believe the American people want us to focus on our job security, they want us to focus on their job security, he said.
Many analysts expect the jobless rate will remain close to 10 percent for the rest of the year. Most predict U.S. growth to slow to between two and half and three percent in 2010 as government stimulus efforts begin to fade.