Stronger consumer spending helped push U.S. growth ahead at a faster rate than previously thought in the first quarter but jobs remain scarce, government reports showed Thursday.
The Commerce Department said gross domestic product, the broadest measure of U.S. economic output, grew at a revised 1.9% annual rate in the January-March quarter, better than the 1.6% estimated a month ago.
That exceeded a slim 1.4% rate of growth posted in the fourth quarter of 2002 but remains well under the pace of about 3% economists consider necessary to generate enough jobs to lower the current 6% unemployment rate.
A separate report from the Labor Department highlighted the dearth of hiring that has accompanied a crawling recovery from recession in 2001.
The Labor Department said that although new claims for jobless pay fell last week, the number of people continuing to draw benefits rose to the highest level in about 18 months.
Initial claims for state unemployment insurance benefits, a gauge of the job market’s resilience, fell to 424,000 in the week ended May 24 from a revised 433,000 the prior week, the Labor Department said.
But some 3.76 million Americans continued drawing jobless pay in the week ended May 17, up 83,000 from the prior week and the highest total since 3.8 million in November 2001, shortly after the terrorist attacks that temporarily hobbled economic activity.
The latest GDP data implied the economy might be poised for faster growth in the second half of the year, with interest rates at 40-year lows and fresh tax cuts in place.
Businesses added to inventories at a slightly stronger rate than first thought in the first quarter -- $13.2 billion instead of $12.8 billion, which economists took as a sign of confidence since consumers were still spending freely.
The Commerce Department said consumer spending grew at a 2% rate in the first quarter instead of the 1.4% it reported a month ago -- a key reason for the upward revision in GDP since consumers drive about two-thirds of economic growth.
Business investment softened in the first quarter, contracting at a 4.8% rate after expanding 2.3% in the last quarter of 2002. Spending on equipment and software dropped even more rapidly, falling at a 6.3% rate after a 6.2% growth pace the final quarter of 2002.
There were signs of continuing modest recovery, such as a 2.5% rise in corporate profits after taxes to a seasonally adjusted annual rate of $484.4 billion in the first quarter.
The Commerce Department also revised its estimate of exports. Instead of being down at a 3.2% rate in the first quarter, they fell just 1.4%, reflecting a moderately better trade performance over the quarter.