Beyonce For Obama.

Beyonce in Obama T-Shirt, with husband Jay-Z.

Economy grows at 5.7 pct pace, fastest since 2003

WASHINGTON (AP) - The economy's faster-than-expected growth at the end of last year, fueled by companies boosting output to keep stockpiles up, is likely to weaken as consumers keep a lid on spending.

The 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003. It marked two straight quarters of growth after four quarters of decline. Growth exceeded expectations mainly because business spending on equipment and software jumped much more than forecast.

Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade. Many estimate the nation's gross domestic product will grow 2.5 percent to 3 percent in the current quarter and about 2.5 percent or less for the full year.

That won't be fast enough to significantly reduce the unemployment rate, now 10 percent. Most analysts expect the rate to keep rising for several months and remain close to 10 percent through the end of the year.

High unemployment and stagnant wage growth will likely keep consumers cautious about spending. Wages and benefits paid to U.S. workers posted a scant gain in the fourth quarter. And for all of last year, workers' compensation rose by the smallest amount on records going back more than a quarter-century.

The economic recovery could falter if consumers, who account for 70 percent of economic activity, lack the income to ramp up spending.

"That's why there's so much hand-wringing right now," said Brian Bethune, chief U.S. financial economist for IHS Global Insight. "Can the economy really sustain this? That's the big question mark sitting out there."

With hiring still weak, President Barack Obama has stepped up his focus on job creation. On Friday, he will outline the specifics of a proposal to provide tax cuts to small businesses that hire new workers. He touted the plan in his State of the Union address earlier this week.

The goal is "to encourage businesses to respond to rising demand and output by taking the plunge and hiring new workers again," said Christina Romer, Obama's top economic advisor.

About 60 percent of the fourth quarter's growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession.

Changes to inventories added 3.4 percentage points to the fourth-quarter growth, the Commerce Department said in its report Friday. Excluding inventories, the economy would have grown at a 2.2 percent clip, the government said. That's an improvement from 1.5 percent in the third quarter.

Consumer spending rose 2 percent, down from a 2.8 percent rise in the third quarter. It added 1.4 percentage points to GDP growth.

A steep increase in exports also helped boost growth last quarter. The shipment of goods overseas rose 18.1 percent, far outpacing a 10.5 percent rise in imports. Net exports added 0.5 percentage point to GDP.

Government spending was actually a slight drag on growth in the fourth quarter: A small increase in federal spending was outweighed by a drop in state and local spending.

Still, federal government spending is likely to pick up and add to growth in the first quarter, Bethune said.

Business spending will likely boost economic growth for several quarters, Bethune said, though not likely enough to make up for sluggish consumer spending. Many companies are upgrading computers, cell phones and machinery as their equipment needs to be replaced just to maintain current levels of production.

In addition, many businesses have healthy balance sheets and don't need to pay off the large debts that households are struggling with, Bethune added.

For now, the growing economy is benefiting companies up and down the supply chain. Ford Motor Co. this week reported higher fourth-quarter sales and its first annual profit in four years, as it recovers from the devastating downturn the auto industry.

Ford's "recent success has benefited us," said Tom Schumann, general manager of EC Kitzel & Sons Inc., a small cutting tool fabricator based in Cleveland, Ohio.

The company, which has 30 employees, bought a new machine tool in December and hired a new worker to run it, the company's first hire since last spring. Still, many of the company's suppliers are struggling.

"I'm not totally convinced we're out of the woods yet," Schumann said, referring to the economy.

Friday's report is the first of the government's three estimates of gross domestic product and is likely to be revised. The government initially estimated third quarter growth was 3.5 percent, which was later revised down to 2.2 percent. The next estimate will be released Feb. 26.

The report provided an upbeat end to an otherwise dismal year: The nation's economy declined 2.4 percent in 2009, the largest drop since 1946. That's the first annual decline since 1991.

State of the Union address: Putting Washington at the Service of the Middle Class

Message from the President: WE DON'T QUIT

(Thu, Jan 28, 2010 12:44 am) I just finished delivering my first State of the Union, and I wanted to send you a quick note. We face big and difficult challenges. Change on the scale we seek does not come easily. But I will never accept second place for the United States of America. That is why I called for a robust jobs bill without delay. It's why I proposed a small businesses tax credit, new investments in infrastructure, and pushed for climate legislation to create a clean energy economy. It's why we're taking on big banks, reforming Wall Street, revitalizing our education system, increasing transparency -- and finishing the job on health insurance reform. It's why I need your help -- because I am determined to fight to defend the middle class, and special interest lobbyists will go all out to fight us. Help me show that the American people are ready to join this fight for the middle class -- add your name to a letter to Congress today: http://my.barackobama.com/SOTU We have finished a difficult year. We have come through a difficult decade. But we don't quit. I don't quit. Let's seize this moment -- to start anew, to carry the dream forward, and to strengthen our union once more. President Barack Obama

Paid for by Organizing for America, a project of the Democratic National Committee -- 430 South Capitol Street SE, Washington, D.C. 20003. This communication is not authorized by any candidate or candidate's committee.

Watch: The President's Cabinet Reporting to You

Good Afternoon,

Tomorrow evening, President Obama will stand before a joint session of Congress and deliver his first State of the Union address outlining where we are and where we’re going as a Nation. In preparation for this annual address, he asked his Cabinet to take a moment to prepare a similar report for the American people.

In short videos, members of the President’s Cabinet report back to you on their progress this first year and outline what lies ahead for their departments and agencies to keep America moving forward. Secretary Sebelius talks about the Department of Health and Human Services' successes helping to prevent the spread of the H1N1 virus; Department of Energy Secretary Chu highlights the thousands of green jobs they’ve created using Recovery Act dollars; and Secretary Clinton details the Department of State’s efforts to restore global partnerships.

Take a look and get a sense of what’s to come in tomorrow’s State of the Union address:

When President Obama took office a year ago, we faced an array of historic challenges: an economy in freefall, job losses averaging almost 700,000 a month, a middle class under assault, two wars and badly frayed global alliances.

Faced with these unparalleled challenges, the President and his Cabinet got to work. The Administration took bold steps to rescue the country from a potential second Great Depression; to rebuild the economy for the long-term, so businesses can thrive, the middle class can grow and all our families can be more secure; and to restore America’s leadership in the world as we wrestle with the global challenges of the 21st Century.

Check out the Cabinet’s reports and learn more about what we’ve done this past year and how we plan to keep our Nation moving forward in the next.

Thank you,

Valerie Jarrett
Senior Advisor to the President

P.S. Tomorrow at 9 p.m. EST, remember to watch the President’s State of the Union address live at WhiteHouse.gov.

State of the Union

On Wednesday evening, President Obama will deliver his first State of the Union address. It comes at a critical moment. We must regroup, refocus, and re-engage on the vital work ahead. So let's watch it together at a State of the Union Watch Party in your neighborhood. We've hit some serious bumps in the road recently in our march toward change. We always knew it would be difficult, but this past week has definitely been a hard one, for all of us. But this movement didn't come so far without making it through some challenging times. It's at moments like these when we need you most. People are hurting. Our country is at a crossroads, and in communities like yours all across America we must all fight for the progress our families and businesses need to thrive. The President's resolve has never been stronger to keep fighting for health insurance reform, for lasting job creation, and to rein in the big banks and fight the undue influence of lobbyists. Wednesday's speech will be a pivotal moment for us all to get on the same page and continue the fight together. In just two days, OFA supporters like you will be gathering at State of the Union Watch Parties in living rooms and community centers across the country. You can share ideas and experiences -- and I'll be joining on the phone for a special strategy huddle before the speech. Find and RSVP for a State of the Union Watch Party near you: http://my.barackobama.com/AttendSOTU I hope you can join us, David Plouffe P.S. -- Volunteers have set up hundreds of Watch Parties over the last few days. But if there isn't one yet near you, just sign up to host one yourself. It's easy and fun, local OFA organizers will help you with any questions you have, and it's an incredibly important way to let supporters near you be part of the action: http://my.barackobama.com/HostSOTU

(Posted by Javin James)