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U.S. economy is going up, 3.2. GDP growth in first quarter, but unemployment remains high.

Obama puts money on small business

U.S./ GDP Growth

American consumers helped propel the U.S. economy at the start of 2010, taking over leadership of a recovery that is starting to generate the jobs needed to ensure it’s sustained, Bloomberg reported today.

Gross domestic product grew at a 3.2 percent annual rate in the first quarter as household spending climbed at the fastest pace in three years, figures from the Commerce Department showed today in Washington. Other reports indicated the world’s largest economy accelerated to start the second quarter.

Growing sales at retailers from Macy´s. to Starbucks Corp. , combined with additional gains in business investment, show the expansion is broadening. The Federal Reserve’s preferred inflation gauge climbed at the slowest pace on record, giving policy makers scope to hold down interest rates and encourage companies to keep hiring.

“You’ve got an economy going up, and you feel increasingly confident that it is on the upswing,” said Neal Soss chief economist at Credit Suisse in New York. “The economy’s balance keeps getting better.” READ MORE HERE.

Unemployment.

Full employment ain’t what it used to be.

Economists since the mid-1990s have reckoned that full employment was equivalent to about a 5 per cent unemployment rate, taking into account the time required to switch jobs. Now Nobel Prize winner Edmund Phelps and Pacific Investment Management chief executive Mohamed El-Erian say the fallout from the deepest recession in more than five decades is driving the so-called natural rate higher, perhaps to 7 per cent.

“We are in the midst of a large and protracted increase in both actual unemployment and its natural rate,” said El-Erian, 51, whose Newport, California-based company manages the world’s largest bond fund. Even with the economy growing, “it will take at least a couple of years” for joblessness to fall to 7 per cent from 9.7 per cent now.

That may keep the federal budget deficit near a record US$1.6 trillion ($2.2 trillion) into next year and might prevent the Federal Reserve from raising interest rates in 2010, said Bruce Kasman, chief economist at JPMorgan Chase, the second- largest US bank. Elevated unemployment would also “dampen the recovery in consumption and economic growth”, El-Erian said.

President Barack Obama has highlighted job creation as the ultimate measure of the economy’s health, telling CNN television this month that it is “the single most important thing we can do”.

By this measure, the US is still coming up short, he added. That may hurt Obama’s Democratic Party in the November 2010 Congressional elections.

Government data to be released this weekend will probably…READ MORE HERE

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