The latest reading on gross domestic product for the January to March quarter shows the economy expanding slightly faster than the 1.6 percent growth rate estimated a month ago, the Commerce Department reported Thursday. The GDP is the broadest measure of the economy's health.
Carl Tannenbaum, chief economist at LaSalle Bank, said the economy needs to crank up growth to a rate of around 3 percent or higher to get back into a more normal growth pattern and get companies to really start hiring. "Until that happens, it won't feel much like a economic recovery to the average person," he said.
The new GDP estimate, based on more complete data, was right on target with economists' expectations. GDP measures the total value of goods and services produced within the United States.
One of the main reason's the first-quarter GDP reading was revised higher was because consumers — the main force keeping the economy going — opened their pocketbooks and wallets a bit wider than previously thought.
Still, the country was feeling the strains of war jitters and bad weather in the first quarter, factors that weighed on an already lumbering economy, economists say. In the last three months of 2002, economic growth clocked in at a mediocre annual rate of 1.4 percent.
In a second report, new claims for unemployment benefits dropped last week by a seasonally adjusted 9,000 to 424,000, for the week ending May 24, the Labor Department reported. But even with the decline, claims were above the 400,000 mark, a level associated with a weak job market.
The number of unemployed workers continuing to collect jobless benefits, however, jumped by 83,000 to an 18-month high of 3.76 million for the work week ending May 17, the most recent period for which that information is available.
"After peaking in mid-April, claims have trended down but still remain uncomfortably high," Sophia Koropeckyj, economist with Economy.com, told CBS MarketWatch. "Moreover, continuing claims reached a new peak, higher than the post-9/11 surge. A return to job creation remains elusive."
Federal Reserve Chairman Alan Greenspan, in a Capitol Hill appearance last week, predicted that economic growth in the current April-June quarter "is going to be quite soft."
Private economists agree. They don't think the economy will do much better than the first quarter. Forecasts for second-quarter economic growth range from a 1.8 percent rate to a rate of more than 2 percent.
Greenspan told lawmakers that the "economy continues to be buffeted by strong cross currents."
He said recent economic reports on employment and production have been "on the weak side." But improved conditions in financial markets and strong productivity gains — a key to the nation's long-term economic well being — augured well for the economy's future.