U.S. GDP Growth Slows to Just 1.4%

WASHINGTON -- The U.S. economy grew at a mediocre 1.4 percent annual rate in the final quarter of 2002, and many economists think it won't do much better -- and perhaps worse -- in the current quarter as the stagnant job market and war uncertainties make American consumers and businesses more cautious.

The government's final estimate of the gross domestic product in the final three months of last year was unchanged from its previous estimate a month ago, the Commerce Department reported Thursday. That matched analysts' expectations.

GDP measures the total value of goods and services produced within the United States and is considered the best barometer of the economy's health.

Optimistic economists believe the economy in the current January-March quarter grew at a rate of around 1.5 percent to just over 2 percent. But pessimists are forecasting growth of under a 1 percent rate. Some economists believe the first quarter experienced negative growth, meaning the economy shrank.

In another report, new claims for unemployment benefits last week fell by a seasonally adjusted 25,000 to 402,000, a two-month low, the Labor Department said. However, even with the drop, claims are at a level suggesting the job market remains sluggish.

The latest reading on GDP highlighted the economy's struggle to get back on a steady footing after getting knocked down by the 2001 recession.

The 1.4 percent growth rate marked a sharp slowdown in the economy from the 4 percent pace registered in the third quarter of 2002. Since the end of 2001, economic growth has been jagged, with a quarter of strength followed by a quarter of weakness.

That muddled climate -- along with concerns about the war, higher oil prices and a turbulent stock market -- has made businesses reluctant to lock into major financial commitments, namely capital investment and hiring. That is the biggest factor restraining the economy's ability to get back to full throttle.

Although businesses have largely battened down the spending hatches, consumers have been the main force keeping the economy going.

But consumers are becoming more cautious -- especially as the job market has worsened. The nation's unemployment rate rose to 5.8 percent in February as the economy lost a whopping 308,000 jobs.

Economists are concerned about how consumers will behave in the months ahead, a main force that will shape the recovery.

In the final quarter of 2002, consumer spending grew at a rate of just 1.7 percent, slightly better than the government's previous estimate, but a sharp pullback from the 4.2 percent growth rate registered in the third quarter.