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New Figures Show Slump in Economy : Recovery: Government says growth slowed from 4.7% to 1.8% during first quarter. White House says report demonstrates need for stimulus program.

TIMES STAFF WRITER

The U.S. economy began to stall again in the first three months of the year, the government reported Thursday, providing President Clinton with new ammunition in his battle to revive the Administration’s rejected job-creation proposals.

In the first report card on the overall health of the economy since Clinton took office, the Commerce Department said the annual rate of economic growth slowed to 1.8% in the first quarter, a surprisingly sharp drop from the fourth-quarter pace of 4.7%.

The Administration immediately seized on the report to underscore its efforts to revive key elements of its $16.3-billion economic stimulus plan, which was defeated last week by filibustering Senate Republicans.

“This morning’s economic figures . . . support the policies of this Administration,” Clinton said. “It also plainly proves, I think, that the Administration was right in trying to hedge against this economic slow growth by passing the jobs bill.”

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Added Leon E. Panetta, director of the White House Office of Management and Budget: “Today’s growth numbers clearly justify the Administration’s concerns about the economy. Right now, this is an anemic, no-jobs, slow-growth recovery.”

Many economists had predicted that the rate of growth in gross domestic product--the economy’s total output of goods and services--would slow during the first quarter, but the decline turned out to be much bigger than expected.

The decline was blamed in part on a big drop in military spending. Analysts also noted that the figures were skewed by a massive winter snowstorm that blanketed the East Coast in March.

But the first-quarter figure also reflected increasing wariness on the part of U.S. consumers, whose spending rose at an anemic 1.2% rate after surging at a 5.1% rate in the fourth quarter. And it followed a series of other statistical reports signaling slower growth.

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Although the U.S. economy has expanded in each of the last eight quarters since the recession of 1990-91, the rate of growth has been sluggish compared to the vigorous recoveries that have followed other post-war slumps.

Analysts said the economy simply is not growing fast enough to create the jobs needed to bring down unemployment.

The weak economic report coincided with the completion of Clinton’s first 100 days in office, lending special political significance to the data.

The Administration, its Democratic allies in Congress and the Republican opposition all quickly incorporated the first-quarter figures into their ongoing debate over Clinton’s economic agenda.

Panetta, who found himself at the center of a political firestorm earlier this week for making candid remarks suggesting that Clinton’s program is in deep trouble on Capitol Hill, made an effort to show his support for the Administration’s agenda.

He said in a prepared statement that the new figures demonstrate the need for Congress to take up the President’s rejected stimulus proposals once more.

“Unfortunately, a minority of the Senate is still standing in the way,” Panetta said. “Unless that changes, the future of the recovery will remain very much in doubt.”

White House officials have said that they intend to reintroduce key provisions of the economic stimulus package, which contained emergency funding for summer jobs, highway improvements and other public works programs designed to put people to work with government funds.

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Many economists considered Clinton’s stimulus plan too small to make much of a difference in a $6-trillion economy. And its effect would have been overshadowed by the President’s long-term deficit reduction plan, which calls for significant cuts in defense spending and the largest package of tax increases in history.

“Clinton’s overall package is contractionary,” said Christopher Rude, an economist with Swiss Bank Corp. in New York.

Indeed, the Administration is increasingly worried about the prospects for its long-term economic plan, which is designed to generate economic growth by curbing the deficit while targeting spending on new domestic initiatives.

Although it quickly approved the Administration’s broad budget blueprint, Congress is now threatening to significantly alter both the tax and spending provisions in Clinton’s multiyear package.

Administration allies said the President must make a strong public case if he hopes to protect the package, especially its core of new “investment” initiatives for job training, education and public works.

Any bad economic news, such as further signs of slowing growth, may help the White House create a sense of urgency about the President’s program.

The weak first-quarter growth “again demonstrates the need for President Clinton’s jobs bill and for significant long-term investment to strengthen the ability of the economy to grow,” said Rep. David R. Obey (D-Wis.), chairman of the congressional Joint Economic Committee. “If the economy doesn’t grow faster than this, our chances of reducing unemployment over the next year are about as great as the Chicago Cubs winning the pennant.”

But Senate Minority Leader Bob Dole (R-Kan.), who led the successful Republican fight against the stimulus plan, argued that Clinton’s policies have contributed to the decline in consumer confidence and an ongoing erosion in economic growth.

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“After 100 days of ‘tax and spend,’ it looks like the American people are grading the President with their pocketbooks. . . . And they’re not buying,” Dole said. “If the latest economic figures are any indication, the next 100 days will have to be a lot better if our economy is going to get a lot better. For the first 100 days, Americans have heard nothing but tax and spend, tax and spend, tax and spend from the White House.”

Economists noted that the first-quarter figures, which will be revised twice more by the government, were skewed by the winter weather. Several said they are sticking to their earlier projections that the U.S. economy will grow by a modest rate of about 2.5% this year.

Still, several were troubled by slower growth in consumer spending and increasing inventories of unsold manufactured goods.

Unless retailers see a significant increase in consumer spending in coming weeks they may reduce their orders from manufacturers, which in turn could lead to production and employment cutbacks at American factories, some analysts said.

In a separate report issued Thursday, the government said that initial jobless claims, an early indicator of unemployment, fell slightly last week.


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