Higher spending still lacks vigor

May 1, 2010 at 12:00a.m.

Associated Press

WASHINGTON

Consumers spent more and helped lift the economy last quarter but not enough to ignite the recovery and drive down unemployment.

Spending by consumers rose by the fastest pace in three years, the Commerce Department said Friday. That helped the economy grow at a 3.2 percent pace in the January-to-March quarter. It marked the third-straight quarterly gain as the United States heals from the longest and deepest recession since the 1930s.

Still, growth was weaker than in the fourth quarter of last year, when the economy grew at 5.6 percent. The first quarter’s performance normally would be considered respectable in normal times. Yet coming out of the severe recession, more-robust growth is needed to drive down high joblessness, stimulate wage increases and lift consumer spending.

Economic growth would have to equal 5 percent for all of 2010 just to lower the average jobless rate for the year by 1 percentage point.

In a Rose Garden statement, President Barack Obama said more jobs are still needed, but he called the quarterly report “an important milepost on the road to recovery.”

Adding more uncertainty to the U.S. economy is the spreading European debt crisis.

The modest economic growth in the U.S. gave investors another reason to pull back from what has been a hot three months of trading on Wall Street. The Dow Jones industrial average was down nearly 104 points in midafternoon trading.

One bright spot in the Commerce report was that consumers increased spending at a 3.6 percent pace in the first quarter. It was the strongest showing since early 2007 — before the economy tipped into a recession.