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Economic Cold Comfort?

Friday’s economic news warranted only lukewarm to cold comfort for those of us hoping for a sustainable, broad-based economic recovery with steadily spreading opportunity.

Top line, the U.S. economy grew at its fastest pace in six years in the last three months of 2009, expanding at 5.7 percent yearly rate over the previous quarter, as businesses accelerated their exports and began to replenish drawn-down inventories and invested more in equipment and software.

Consumer spending was up a bit and exports were up a lot. In fact, exports grew at an annual rate of 28 percent in the fourth quarter, which the National Association of Manufacturers said was the fastest increase and the largest contribution to economic growth in 30 years. Of the 5.7 percent rise in gross domestic product, in this connection, trade accounted for 0.5 percent of the growth, since while exports added 1.9 percent of the growth imports subtracted 1.4 percent. At this rate, the economy probably won’t slide back into a recession and it might even hit President Obama’s State of the Union goal of doubling exports over the next five years.

So what’s not to like? Well, several caveats and some other less welcome economic news were also circulating this weekend. To start with, economists like Paul Krugman cautioned that the fourth-quarter pace of growth represents an “inventory blip” that will likely abate as the production pulse associated with inventory restocking slows and the impacts of the federal stimulus package taper later this year. More broadly, the good news was tempered by sobering data about pay from the Labor Department. Wage and benefit costs, both before and after adjusting for inflation, grew more slowly in 2009 than in any year since the U.S. government began tracking such data in 1982, as double-digit unemployment weakened workers’ ability to command higher pay. Dave Wessel of the Wall Street Journal has the details at Real Time Economics:

Over the past 12 months, the cost of wages and benefits for workers other than those employed by the federal government rose 1.5 percent, according to the Labor Department’s employment cost index. Over the same period, consumer prices rose 2.7 percent. Adjusted for inflation, wages and benefits fell by 1.3 percent after rising by 2.8 percent in 2008, the first year of the recession. The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1 percent higher than at the end of the previous recession in 2001, the Labor Department said.

All in all, then, this is another worrisome juncture in a very harsh period. My growing worry: With the Senate about to consider jobs legislation, legislators will focus on the “inventory blip” GDP blow-out and forget double-digit unemployment and the miserable wage plight of so many workers.