ARI SHAPIRO, Host:
This is MORNING EDITION from NPR News. I'm Ari Shapiro.
STEVE INSKEEP, Host:
And I'm Steve Inskeep. Good morning.
We're going to ask, this morning, what the latest big economic number really tells us about the economy. It's the measurement of the Gross Domestic Product; the output of goods and services. Today, the government reported the GDP expanded at an annual rate of 5.7 percent. Now, as with any economic news of the last few years, this number's certainly to prompt a lot of political, as well as economic discussions, so we're going to sort out the basics at the beginning, here, with NPR's economics correspondent, John Ydstie, he joins us live. John, good morning.
JOHN YDSTIE: Hi, Steve.
INSKEEP: Five point seven percent sounds really good after some of the economic disasters of the last couple of years. How good is it?
YDSTIE: Well, it's good news. It's good news, but I think saying the economy is healthy again would be going too far. The biggest contributor to the growth was inventory replenishment. You know, during a recession, businesses - businesses used up their inventories in their warehouses. They were too nervous to order - particularly in this deep recession - and their warehouse levels got way down, inventories got too low. So now they're ordering more, which means manufacturing lines are running again - that's good news.
But this is typically what happens after a recession, you get a big growth number like this, but it doesn't necessarily mean we've got a self-sustaining recovery. You've got to have a corresponding increase in consumer demand to get that cycle going.
INSKEEP: Just so I understand what's happening here, some of the stores that I've been in the last year or so, where it seems you can hardly find anything on the shelves - that's 'cause they were too nervous, they were afraid customers weren't going to come. Now they're confident customers will be coming, so they're ordering more stuff.
YDSTIE: Well, they've just got inventory so low...
INSKEEP: They can't help but...
YDSTIE: They can't stay in business if they don't have something on the shelf. So they have to have something.
INSKEEP: Okay, they're ordering something, which means manufacturers can go back to work. But you mentioned consumer spending, where's that at in here?
YDSTIE: Well, there's a bit of good new in this report on that, too. Consumer spending rose at an annual rate of two percent during the last three quarters of last year. That's actually not as fast as in the third quarter, when the Cash for Clunkers program artificially boosted consumer spending. But it's a heartening increase.
INSKEEP: more jobs, more money in the pockets of consumers, a growth in spending, and then more hiring, and you've got a sustainable recovery.
INSKEEP: Let's remember that the unemployment rate officially is around 10 percent. Do economists expect that improve anytime soon?
YDSTIE: Well, the most recent numbers - the numbers on initial claims for unemployment benefits this week were a bit disappointing. And in the most recent employment report for December, the government said the economy had lost 85,000 jobs. So we'll see what happens when we get a new report in about a week.
Most economists will - feel it will take a long time for unemployment to come back, and so that the recovery will settle down after this big inventory replenishment and grow in the range of two percent or so.
INSKEEP: We already have a this morning from the White House on the economic news. It comes from one of their top people on the economic team, Christina Romer, who calls this the most positive news to date on the economy, but also says it's important not to read too much into a single report, positive or negative. Are both of those statements basically true?
YDSTIE: I think they are true. And, you know, I don't think we're quite out of the woods yet. We've had two quarters of consecutive growth after four straight quarters of the economy declining. Most people might say that's a recovery, and I think most economists would say we're in a recovery. Now, in fact, some are saying today that it is a self-sustaining recovery, but the official arbiters of these things have not made a pronouncement yet. So it's not official.
SHAPIRO: still lots of foreclosures happening, banks still not lending a lot, businesses still very cautious. So I think, you know, Christina Romer said also - the White House economic advisor - that there will surely be bumps in the road ahead. And I think that's true.
INSKEEP: And a reminder that even if some people did prosper as the economy plunged, many people are going suffer, even as the economy improves. It's just the way that it works.
YDSTIE: Absolutely. It's going to take time.
INSKEEP: NPR's John Ydstie, thanks very much. And again, the news this morning: The economy, according to the government, grew at a rate of 5.7 percent in the fourth quarter.