- The Washington Times - Friday, January 31, 2003

Economic growth last quarter slowed nearly to a standstill, inching ahead by 0.7 percent, as consumers cut their spending to the lowest level in a decade, the Commerce Department reported yesterday.
The sudden slowdown from last summer's 4 percent growth pace reflects a falloff in auto sales as well as the toll from high energy and health care costs, reduced incomes and jobs, and a drop in confidence provoked by worries about war and a tumbling stock market, economists said.
Vice President Richard B. Cheney said the figure "underscores the need for Congress to pass the president's jobs and growth plan as soon as possible," in a speech before the Conservative Political Action Conference.
He noted that Mr. Bush's accelerated tax cuts would quickly put more money in consumers' pockets and perk up spending, while the plan's investment-tax cuts would promote spending and hiring by businesses addressing two weak spots seen in the report.
About half of the plan's $100 billion in tax cuts in the first 16 months would go to small-business owners who could use it to create new jobs, he said.
A study published by the Business Roundtable, a group of Fortune 500 companies, yesterday also predicted the Bush plan would push up growth by 2.4 percent a year and generate millions of jobs.
But a potential Democratic opponent in the 2004 election seized on the ailing economy as a major Bush liability.
"Over the past eighteen months, the president's tax cut has reaped nothing but stalled economic growth, lost jobs, and a dramatic return to deficit spending," said Sen. John Edwards of North Carolina.
"If his last tax cut hasn't restored economic growth or created jobs, why should any of us believe that more of the same is going to help?"
Economists say generating more jobs and income not only will be critical for Mr. Bush's political fortunes, but also will be necessary to ensure the economy does not slip back into recession.
Growth for all of 2002, at 2.4 percent, exhibited a moderate recovery from the recession of 2001, when growth totaled just 0.4 percent. But despite some progress last year, the recovery so far has failed to generate new jobs.
The bleak outlook for job hunters showed in an index of help-wanted advertising published by the Conference Board yesterday, which registered the lowest volume in almost four decades.
Wage gains during the fourth quarter also were the weakest in years at 0.4 percent, the Labor Department reported.
One reason for the weak growth in wages is the escalating cost of health care, which pushed up benefit costs by 1.3 percent during the quarter, the department report showed.
Benefit costs make up more than a third of a typical worker's compensation.
"The soft economy has translated into minimal wage gains," said Joel Naroff of Naroff Economic Advisers, who noted that high health care costs not only are eroding workers' incomes but have become a difficult problem for employers to solve.
The Labor report showed 2.7 percent growth in wages last year, down dramatically from 3.7 percent in 2001. The drop in income was accompanied by a jump in energy costs that economists say also is eating into consumers' purchasing power.
As a result, growth in consumer spending dropped to a 1 percent rate during the fourth quarter the slowest since 1993.
The overall growth rate of 0.7 percent would have been even weaker without a 6.9 percent jump in housing investment and 10.2 percent surge in federal spending fueled by defense.
Subtracting from growth was the first decline in exports in a year and a drop in business spending on inventories.
One bright spot was the first rise in business-investment spending in two years, owing to a 5 percent spurt in purchases of equipment and software.
"The recent string of gains in equipment and software spending is encouraging," said Debbie Johnson, economist with Prudential Securities.
Such investment spending is "highly correlated with profits," she said, and should lead to higher corporate earnings and higher stock prices later this year.
The rise in business investment helped boost the dollar yesterday, but it failed to prevent another down day on Wall Street.
Partly out of gloom over the low growth figures, the Dow Jones Industrial Average tumbled 166 points to 7,945.

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