Economists Wary of Recent Quarterly Gains

The U.S. economy racked up its best quarter in six years when the government a strong 5.7 percent at the end of 2009. That makes two straight positive quarters after a year of declines, but economists say don't get used to it, reports CBS News Correspondent Anthony Mason.

"I don't think it can be sustained at that rapid pace," said Stu Hoffman, chief economist of PNC Financial Services.

A big reason for the rebound: Businesses had cut their inventories to the bone.

"What that means is that any demand that increased now immediately translates into economic activity because there's no stock left to take it out of," said Bill Hewgley, CEO of Metalworking Solutions in Chatanooga, Tenn.

Hewgley said his business is a good barometer of the economy, and business is picking up.

"I now say by April you'll be saying on television things are getting better," Hewgley said.

"We're definitely seeing signs of life in the private sector, in business investment, in consumer spending and even in housing," Hoffman said.

Housing constructions were up 5.7 percent. Consumer spending jumped 2 percent. They noticed it at Paddywax, a Georgia-based candle and home fragrance company.

"Towards the end of the fourth quarter the consumer had a different outlook and was a little bit more optimistic and that filters up," Paddywax's David Duncan said.

After his business flickered early last year, it's come roaring back.

"I'm very optimistic," he said.

But the most encouraging sign may be business investment in equipment which surged more than 13 percent.

Hewgley just spent half a million dollars on a new laser cutter.

"We decided to go ahead and invest in the capacity to be ready the day the marketplace says, 'We're OK, we're going to buy some product,'" Hewgley said.

But the fourth quarter surge did not produce any jobs. The president's proposed $5,000 tax break for hiring could make some companies pull the trigger, but economists say no company will hire till its clear the business is there.

[sean71z]

Strong GDP equals corporate dividends. Companies will continue to hire full time workers to meet production schedules. The Obama Admin could make the smart move and settle this dispute in Afghanistan. War in the Middle East is costly for this country. Al Qada and the Taliban might agree if promised revenue from the international sale of medicinal poppies and cannabis.

[tmittelstaed]

Business is up but that is only because business cut too much last year. What's going on is business is rising up a bit - but it's going to level off. The smart investors know this which is why the stock market gained and then is in this fluctuating pattern right now.
There's always a bounceback from the initial dive into a recession.

The problem is consumer spending and that simply isn't going to come back until real wages rise - and wages won't rise until there's a shortage of skilled workers again. Businesses usually start up hiring in the end of Jan. and through March of every year and all the investors are watching the job creation reports closely right now. If the job creation reports are lackadasical, then there won't be a sustained recovery this year. What your reading right now in the news is pure economic propaganda - the government is hoping to get business owners thinking things are going to get busier and to get the jump on hiring. In previous years this might have worked, but I doubt this year. Even the article about the candlemaker was very telling - he chose to sink a half-mil into a machine, rather than into hiring workers - and if most businesses choose this path - buying hardware rather than hiring - then we won't have a recovery for another 2 years.

[HiTor15]

YEAH SURE...IT DID....Who is supposed to buy all this investment equipment? Er just exactly who is going to have a job left? THESE PEOPLE TALKING IN THE MEDIA ARE SUCH JACK OFFS ITS RIDICULOUS....The consumer is dying and its so bad its plain scary!!! At the very least stop lying, the lies got us here, now the lies are going to bury us. IF THERE IS ANYTHIING I AM SICK AND TIRED OF- TO NO END - ARE THE LIES LIES LIES AND THE LIARS AND DELUDED FOOLS THAT GOT US HERE WITH THEIR ENDLESS LIES AND GREED!!! THEY CAN ALL GO __ THEMSELVES....without employment THERE IS NO TURNAROUND!!! PERIOD!!! HOPE YOU GOT THAT!!! STOP LYING MEDIA, you have done enough lying for decades and you have brought us all to a DEPRESSION and TWO WARS ON TWO FRONTS!!! ENOUGH...GO TO HELL ALREADY.

[dynamited777]

Why don't you tbaggers start blaming Obama for 5.9 quarter GDP growth? Opps, that's a good thing. When did GW EVER lead a quarter that good?

[thinking-hurts]

Caterpillar off 65%
Xerox layoff 2,500
Walmart layoff 11,500
Stein-Mart closing 35 stores
J.C. Penny closing 75 stores
Hot Topic closing 200 stores
Dillards closing 45 stores
Barnes and Noble closing 100 stores
A&F closing 179 stores
Verizon layoff 16,000
Game Stop closing 400 stores
Macy's layoff 1,500

[ToolMangler1]

by thinking-hurts January 30, 2010 6:19 AM EST


Those are the result of the 2008-2009 recession/depression. Company closings for 2010 will be be the ones you can blame on the current administration.

[huegorgan]

Our planet has too many inhabitants. Not everyone will be able to get jobs. Ever. Simple supply and demand. Free market in it's truest form.

Time to wake up, think outside the box, and initiate some population control. Determine what's sustainable.(Pretty sure we've already passed that) Only then can we be assured that everyone will have a job. Take technology out of the sowing and reaping of agriculture, go back to manual labor, and then we might begin to make some progress.

[ToolMangler1]

Just what do you think War, Starvation, Abortion and pestilence/disease are?? That is natures population control. Man won't institute true birth control so these other forms are all thats left. (Mother Nature is non-judgmental) If Man does not wish to be a victim then he had best take charge and make world saving decisions.

[kenhamlett]

I think I will go with Bill Hewgley on this matter. The low inventories are what I was waiting for.

[sjc_1]

First quarter numbers will not be this high, it is inventory filling, but they will be positive and that is better than negative.

[jopuschek]

This is so funny! A candle business is thriving at Christmas!! Wow - what big news! (....in years past,the buyers were probably able to buy more expensive gifts!!!!)..... and with inventory being such a huge factor in this "growth" calculation, the fact that inventories have been pared down to nothing is a huge factor ...... I imagine Obama has never heard about that!!

[jopuschek]

This is so funny! A candle business is thriving at Christmas!! Wow - what big news! (....in years past,the buyers were probably able to buy more expensive gifts!!!!)..... and with inventory being such a huge factor in this "growth" calculation, the fact that inventories have been pared down to nothing is a huge factor ...... I imagine Obama has never heard about that!!

[jgg000101]

the stock market is a 6 month to one year precursor of what is to be expected for economic growth. The market has been unresponsive to any of this "good" newws including today's GDP growth report. The problem is that we have been told good news repeatedly only to have figures revised and re-revised at later dates. The economy cannot rebound without consumer spending and bank lending. If these figures are subsequently revised downward at a later date you will know we are all being played for chumps.

[rightbehind]

Real supply and demand economics are at work now. I see business picking up where I lease space. Things are improving. Called a friend of mine to see how his business is doing. He said good. This country is heading back on the the right path to a real economy. I think people have had their fill of bubbles.