WASHINGTON — The economy edged up at an annual rate of just 0.4% in the final three months of last year, a pace that was weaker than previously believed, the government said Thursday.
The Commerce Department report on the gross domestic product--the total amount of goods and services produced inside the country--showed that the economy slowed to a near-standstill at the end of last year after two quarters of very weak growth.
The Bush Administration brushed off both the weak GDP report and one showing a sharp increase in unemployment claims in March.
It pointed instead to more optimistic signs--reports indicating strength in retail sales and housing construction in January and February.
The GDP report marked a sharp downward revision from a month ago, when the government estimated that the economy grew at an annual rate of 0.8% in the fourth quarter.
A weaker showing in international trade and a slower buildup in unsold business goods were major contributors to the downward revision.
Another report Thursday showed that the weak economy was hurting corporations' bottom lines.
The Commerce Department said that after-tax profits fell by 4.5% in 1991 to $188.1 billion, the poorest showing for U.S. companies since 1987.
A third report--from the Labor Department--showed that the number of Americans filing first-time claims for unemployment benefits jumped to 447,000 for the week ending March 14.
That represented a disappointing 15,000 increase from the previous week. Analysts said it showed that widespread layoffs were continuing and that the job market remains extremely weak.
A Weak Economy
The economy edged up at a revised annual rate of just 0.4% in the final three months of last year, a pace that was weaker than previously believed, the Commerce Department reported. The gross domestic product measures the total amount of goods and services produced in the country. * Key factors: A weaker showing in international trade and a slower buildup of unsold business goods.
* Good signs: Recent reports have showed a pickup in retail sales and housing construction. And inflation is down, with prices rising at an annual rate of 2.2% in the fourth quarter. Business inventories have been lowered.
* Bad signs: The 0.4% increase in GDP in the fourth quarter followed lackluster advances of 1.8% in the third quarter and 1.4% in the second quarter of last year. Those gains followed two straight quarterly declines. Overall, the GDP actually fell by 0.7% in 1991, the first decline since the 1982 recession.
* Why the revisions: The Commerce Department routinely makes three estimates of the GDP for each quarter: an initial estimate and two revisions. Thursday's number is the second of the revisions. Revisions are necessary in order to factor in data not available at the time of the initial estimate. Major components factored into the estimate of GDP include:
* Personal consumption expenditures (two-thirds of GDP), including retail sales, auto sales and use of electricity and gas.
* Business investment, including manufacturers' and trade inventories, manufacturers' shipment of capital goods and value of construction.
* Export and import statistics.
* Government spending.
The California Picture
Despite signs that recovery is beginning in the rest of the nation, California will probably miss out until late this year, according to economic forecasts released Thursday by UCLA. The lag is because of continuing weakness in defense, financial services and real estate, plus job losses in the public sector.
The forecasts, which essentially update December reports, predict that non-farm state employment will fall by 0.5%, or 67,000 jobs, in 1992. That would come on the heels of a 3.4% drop in non-farm employment in 1991, the largest since World War II.
Job losses in weak sectors of the state's economy will more than offset gains in retailing, services, tourism and non-defense manufacturing. Starting next year, however, employment should grow again, by 2% in 1993 and 3% in 1994, the report says.
On the national level, UCLA upgraded its forecast for economic growth from December. It now calls for growth in real gross domestic product of 1.5% in 1992 and 3.1% in 1993.
Key state sectors:
Real estate and construction
* There is anecdotal evidence of strengthening home sales because of lower interest rates. But a pickup in housing starts and public works construction will not offset declines in commercial building in the near term. Construction employment will fall by 6.7%, or 36,000 jobs, in 1992.
* The merger of BankAmerica Corp. and Security Pacific Corp. will result in the loss of 12,000 jobs worldwide over the next three years, the bulk of them in California. That will contribute to total 1992 job losses of 23,000 in the sector.
Aerospace and defense
* Assuming Pentagon budget reductions on the order of President Bush's proposed $50-billion cut over the next five years and a struggling market for commercial aerospace, the forecast projects an employment drop of 8.7%--or 28,000 defense jobs--in 1992, a 6.1% decline in 1993 and a 5.5% drop in 1994.
* In 1992, there will be layoffs in the public sector, which accounts for 13% of state employment, though the job losses will be modest, the forecast says. The employment declines will likely continue through next year.
Gross Domestic Product
Percentage change from previous quarter
4th quarter: +4.0%
Source: Commerce Department