EoW March 2011

EuroWire – March 2011

The economy

The US economic recovery continues to gain

strength despite a lagging labour market

The United States saw its economy accelerate in the last quarter of

2010, driven by rising exports and the biggest gain in consumer

spending in more than four years. According to a Department of

Commerce report released 28

January, gross domestic product

(GDP) grew at an annual rate of 3.2% in the October-December

period, up from 2.6% in the third quarter. That broad measure

of all the goods and services produced in the country indicates

that overall economic output in the US has matched its

pre-recession peak.

With their modestly higher paychecks and somewhat improved

returns on investments, Americans are buying again and cutting

back on saving. And businesses have increased their spending

on equipment and software. Economists are hoping that outlays

of this kind – and for replenishing inventories, which ran low at

the end of last year – will soon be followed by hiring or re-hiring

of workers.

At the World Economic Forum in Davos, Switzerland, Treasury

Secretary Timothy F Geithner acknowledged as much in a TV

interview. “During the financial crisis, [American] companies cut

deeply into the employment base with brutal force,” he said – a

situation“that is going to consign us to a tragicallymoremoderate

reduction in unemployment as the economy recovers.”

But as things continue to improve, the job market will likewise

improve, said Mr Geithner, whose perception of a want of

confidence on the part of business people is shared by many

economists. “Firms have the cash to hire,” Augustine Faucher,

the director of macroeconomics at Moody’s Analytics Inc

(San Francisco) told the

New York Times

The 2010 tax deal negotiated by President Barack Obama with

opposition Republican lawmakers helped set up a self-sustaining

expansion in 2011. Mr Obama has increased US publicly traded

debt toa record$8.86 trillion tosustain theexpansion. Republicans

have told the president and Democratic legislators that they will

require specific budget cuts as a condition of endorsing the rise

in the debt limit.

Dorothy Fabian

USA Editor