By Tim Mullaney, USA TODAY
The U.S. economy slowed in the spring, with second-quarter growth less than half the pace the economy hit late last year, the government reported today.
Gross domestic product grew at an annual rate of 1.5% between April and June, down from 2.0% in the first quarter and 4.1% late last year. More cautious consumers were the main reason. Consumer spending, which makes up about 70% of the economy, grew at a 1.5% rate, compared with 2.4% in the first quarter.
"If consumers grow just over 1%, you have trouble getting the overall economy to do much more than that,'' Bank of America Merrill Lynch economist Michelle Meyer said before the report.
Growth in the second quarter narrowly beat economists' forecasts. The median estimate of more than 80 economists surveyed by Bloomberg was 1.4% growth.
The report from the U.S. Bureau of Economic Analysis appears to include signs that other forces, from Europe's financial crisis to the impending "fiscal cliff'' of tax-cut expirations and deep spending cuts due to take effect Jan. 1, are also affecting consumer and business spending.
Exports grew at a 5.3% rate, up from 4.4% in the first quarter, in a sign that companies are making up for demand lost due to Europe's financial crisis and slightly slower growth in Asia.
Investment also rose 8.5%, better than the first quarter but well below last year's double-digit rates. Companies accelerated spending on equipment and software, but that was more than offset by cuts in spending on new buildings such as factories.
Inventory growth, another component of investment, was 9.7%, down from 20.5% in the first quarter. Like investment, inventory buildup is considered a sign of confidence in future business. Residential investment grew 7.2%, up from the first quarter, as the housing market continued to improve.
The Commerce Department with this report also revised its growth estimates for the past three years.
Those revisions showed that the economy contracted 3.1% in 2009, slightly less than the 3.5% previously reported. Growth in 2010 was put at 2.4%, down from 3%, with growth in 2011 at 1.8% instead of 1.7%.
The recovery remains sluggish by historical standards. The economy lost nearly 8.8 million jobs during the slump and reached its lowest total employment level in February 2010. It is still 4.9 million short of its peak, according to the Bureau of Labor Statistics.
After the 2001 recession, the U.S. economy recovered all of its 2.7 million lost jobs within a year after the number of people working hit bottom in September 2003.
Among the most important differences between the two recessions and their recoveries are the levels of consumer debt then and now, and the growth of government employment.
Governments have cut 633,000 jobs since Barack Obama became president in 2009, out of about 22 million. In George W. Bush's first term, governments at all levels added 700,000 as private-sector employment fell by about 70,000. The economy has added about 200,000 private-sector jobs during Obama's term, and is up nearly 4.4 million since the bottom.
Another reason this recovery has been slow is that consumers still have too much debt, said Harvard economist Carmen Reinhart, co-author of the book This Time is Different, a history of financial crises. Consumer debt is still near 90% of GDP, and about twice as high as it was during the much faster rebound from the 1982 recession, she said. That has especially hamstrung the housing market, which is just beginning to grow again, Reinhart said.