Growth was slight at end of 2012

0.1 percent rate of no help in lowering the jobless rate

The government at first estimated the economy shrank in the last quarter of the year. Above, the Port of Los Angeles.
Nick Ut /Associated Press/File 2012
The government at first estimated the economy shrank in the last quarter of the year. Above, the Port of Los Angeles.

NEW YORK —Breathe a tiny­ sigh of relief, if not exactly contentment: The US economy grew just barely in the last quarter of 2012.

Output expanded at an annual rate of 0.1 percent, which is basically indistinguishable from having no growth and is far below the growth needed to get unemployment back to normal. But at least the economy did not shrink, as the Commerce Department had estimated last month, when the first report suggested that output contracted by an annual rate of 0.1 percent.

The latest estimate, released Thursday, showed that growth was depressed by declines in military spending (possibly in anticipation of the across-the-board spending cuts set to begin Friday) and the amount that companies ­restored their stockroom shelves.


“The good news with business inventories is that what they take away in one quarter they tend to add to the next,’’ said Paul Ashworth, senior US economist at Capital Economics, referring to the measure of this restocking process. ‘‘So there’s a good chance that first-quarter numbers will be better than originally thought.’’

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The output growth number was revised upward from the original estimate partly thanks to updated data on business ­investment and net trade. ­Imports were lower than ­previously reported and ­exports were higher.

Economists expect that ­government spending will ­continue to be a drag on the economy this year, especially if Congress does not avert the spending cuts, which would shave about 0.6 percentage point off growth. Many are hoping that even if the cuts go through, Congress will reverse them in short order.

“They can always change their minds when they have to renew the continuing budget resolution at the end of this month or in April or May,’’ said Ashworth. ‘‘My expectation is that at most the cuts stay a month or two, and in most departments, with a wink or a nod, they won’t do anything crazy.’’

Even if government lops off $85 billion in the so-called ­sequester, as current law calls for, the private sector will offset most of this drag, thanks to the housing recovery and other sources of strength. First-quarter forecasts are for annual growth of 2.4 to 3 percent.


Monetary stimulus from the Federal Reserve, while under fire from some Republicans, is also helping.

“With monetary policy working with a lag and still being eased, the boost to the economy is probably still growing,’’ said Jim O’Sullivan, the chief US economist at High Frequency Economics.

The combination of ­monetary expansion and fiscal tightening has helped lead to a painfully slow drawdown in the unemployment rate. The jobless rate stood at 7.9 ­percent in January. The recent end of the payroll tax holiday is also expected to hold back ­consumer spending, and so job growth as well.

“I think it’s largely steady as she goes for employment,’’ said Jay Feldman, an economist at Credit Suisse. ‘‘I still think we’re in kind of a 175,000-jobs-a-month clip for a while, but with some downside risks later in the year from the sequester.’’