- The Washington Times - Friday, March 29, 2002


The economy, knocked down by recession and terror attacks, snapped back at a stronger pace than previously believed in the final three months of 2001.

Gross domestic product (GDP) the broadest measure of the economy's health grew at an annual rate of 1.7 percent in the fourth quarter of last year, its best performance in a year, the Commerce Department reported yesterday.

The government had initially estimated that the economy grew at a tiny 0.2 percent rate in the fourth quarter. A month ago, that was revised to a 1.4 percent rate.

Yesterday's upward revision to the GDP, based on more complete data, largely reflected an improved trade picture. The latest report reinforces the view that the recession, which began last March, has ended and probably will turn out to be the country's mildest downturn ever, economists said.

"It's starting to look like a pretty picture of recovery," said Stuart Hoffman, chief economist at PNC Financial Services Group.

While the 1.7 percent growth rate is still considered below par, it nonetheless marks a remarkable turnaround for the economy, which shrank at a 1.3 percent rate in the third quarter, following the jolt of the September 11 terrorist attacks.

Some economists are predicting economic growth in the January-March quarter could be at a sizzling rate of 5 percent to 6 percent. Others forecast a rate in the 4 percent range.

Growth should be helped along as the Federal Reserve's 11 interest rate cuts last year make their way through the economy.

Earlier this month, Fed Chairman Alan Greenspan offered his most optimistic assessment of the U.S. economy in more than a year, telling Congress recovery from the recession is under way.

Manufacturers, which had throttled back production during the slump and laid off hundreds of thousands of workers, worked off big stocks of unsold goods and were beginning to add to production.

Against that backdrop, inventory reduction was a little less of a drag on fourth-quarter GDP than previously thought. Economists believe that first-quarter GDP will get a sizable boost as companies replenish stocks.

The trade deficit, meanwhile, shaved off 0.14 percentage point from fourth-quarter GDP, compared with the 0.35 percentage-point reduction previously estimated. That was the biggest factor in the GDP upward revision.

Consumer spending, which accounts for two-thirds of all economic activity in the United States, grew at a 6.1 percent rate, a big pickup from the weak 1 percent rate in the third quarter.

In another sign that the economy appears to be turning around, the Conference Board's Help-Wanted Index increased 4 points in February. The index, which measures the volume of classified job ads in major newspapers, now stands at 51. It was 72 a year ago.

"If the economy is indeed turning the corner, one would expect an improvement in the labor market," said Ken Goldstein, economist with the Conference Board.

But, he said, this index and other labor statistics are generally lagging indicators, so an increase at this point caught him by surprise.

There are tangible signs that the local jobs picture is improving.

Roberta Kaskel, associate director at the Career Center at the University of Maryland, said 190 employers showed up for the center's job fair two weeks ago, a huge improvement over the fall, when the numbers were down 20 percent.

"We, too, are optimistic that things are beginning to turn around for the better, but it's very slow," said Ms. Kaskel.

Staff writer Tim Lemke contributed to this report.

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