The economy turned an important corner at the end of last year, recouping all the ground lost during the Great Recession and expanding into record territory.
The gross domestic product — which measures the value of all the goods and services produced in the U.S. — reached $13.38 trillion in the fourth quarter of 2010, surpassing the peak set three years ago just before the economy sank into recession in the final quarter of 2007, according to a Commerce Department report released Friday.
While economists generally emphasize job creation — and by that measure, the economy still falls short — the milestone passed at the end of last year signaled that the recovery has gained its footing.
Coming on top of a 2.9 percent growth rate in 2010 that was the best since 2005, they say, the expansion has matured to the point that it likely will generate more of the job growth and other "feel-good" features this year.
"The economy is back," said Augustine Faucher, an economist at Moody's Analytics. "Consumers and businesses are finally spending," as seen with a whopping 7.1 percent surge in final sales at the end of last year — the biggest gain since 1984.
"This year will be very good for the U.S. economy," he said, predicting that a rise in consumer sentiment and more money in consumers' pockets from tax cuts will prompt Americans to spend more freely.
"Firms will be unable to keep up with more business without hiring workers, and the labor market will take a decisive turn for the better," he said. "Stronger job gains, in turn, will further boost consumer spending, and a self-sustaining economic expansion will finally take hold."
Harm Bandholz, an economist at Unicredit Markets, also is impressed with the economy's performance last year and foresees a good year for consumers and jobs in 2011.
"The main growth driver this year should be household spending," he said, supported by gradual improvements in the job market and the tax cuts.
Mr. Bandholz sees consumer spending rising at a hearty rate of 3.5 percent this year — "about as much as during the boom years 2004 and 2005."
Chris G. Christopher, an economist at IHS Global Insight, agreed that consumers appear to be ready to spend more as long as problems with the weather, rising gas prices and other obstacles don't linger.
"The shock of higher and rising gasoline prices is wearing off on the consumer, and they have bounced back," he said. "Consumer momentum has been building up over the last couple of quarters of 2010, and we expect that to spill over into 2011."
Josh Bivens, an analyst at the Economic Policy Institute, said the economy's shift from recovery into an expansion mode is not entirely a cause for celebration. He noted that it took extraordinarily long to cover all the ground lost during the recession.
"The three-year lag between the previous business-cycle peak and a return to pre-recession output levels is the longest since World War II," he said. "On average, the U.S. economy has been 9.4 percent larger three years after a recession's beginning."
The economy's long and tortuous journey testifies to the severity of the recession and to the weakness of the recovery, he said.
Although the economy did post an impressive gain of 3.2 percent in the final quarter of 2010 without much help from government stimulus, he said, it still is not growing fast enough to produce the millions of jobs needed to re-employ laid-off workers.
"It is by no means completely healthy," he said. He estimates that at last year's rate of growth, the unemployment rate would inch down slightly this year to 9.3 percent from 9.4 percent at the end of 2010.
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