US economy recovery sustainable? Jobs growth improves, but challenges remain

The US economy managed to stay on track last quarter, defying fears of another spring swoon, but doubts remain as to whether it will finally gain the kind of sustained momentum that has proved so elusive since the recovery began four years ago.

The mixed picture facing the country was evident Wednesday, as the Commerce Department reported that the economy, adjusted for inflation, expanded at a better-than-expected annual rate of 1.7 per cent in the April-June quarter, even as inflation-adjusted growth in the first part of the year now appears slower than first thought. In a separate statement after a two-day meeting of policy makers at the Federal Reserve, the central bank said the economy was on a "modest" trajectory but gave no clue as to when it might start tapering back its huge stimulus efforts.

Like economists, traders, as well as the 12 million unemployed Americans looking for work, the Fed is struggling to gauge whether better growth does indeed lie ahead.

Optimists point to improved levels of job creation in recent months, a more robust housing sector and a surging stock market that has lifted the value of investment and retirement accounts for millions of consumers. Pessimists focus on the fact that the estimated economic growth rate of about 1.4 per cent so far in 2013 is well below last year's levels of 2.8 per cent, even as automatic cuts in federal spending and higher taxes continue to bite.

There were pockets of strength in Wednesday's data from the Bureau of Economic Analysis, all of which will be subject to further revision as the Commerce Department gathers more information about the economy. For example, residential fixed investment increased by 13.4 per cent, a sign that housing continues to rebound. Personal consumption rose 1.8 per cent, as consumers showed some resiliency, especially given the increase in payroll taxes at the beginning of 2013.

Wednesday's report also comes as government experts introduced the first comprehensive change in four years in how the economy is measured. They revised figures all the way back to 1929, while also restating more recent data to show the 2007-09 recession was slightly milder than originally estimated and growth in 2012 was a bit better.

Still, economists emphasized that although the economy's performance in the second quarter was significantly stronger than had been feared - Wall Street experts forecast growth would come in at just under 1 per cent - big challenges remain.

Source: http://economictimes.indiatimes.com/news/international-business/us-economy-recovery-sustainable-jobs-growth-improves-but-challenges-remain/articleshow/21526347.cms

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