Economic Growth Likely Slowed in Second Quarter

The already fragile economic recovery may be getting weaker.

In this July 20, 2010 photo, Haley Wright, left, human resources professional with Plastipak...

In this July 20, 2010 photo, Haley Wright, left, human resources professional with Plastipak Packaging Inc., meets with a prospective job applicant during a National Career Fairs Job Fair in Plano, Texas. New jobless claims fell last week for the third time in four weeks, but remain above 450,000, where they have been all year. (AP Photo/Tony Gutierrez)

(AP)

Economists expect the government to report Friday that economic growth slowed in the April-to-June quarter as consumers bought less, builders pulled back further, and cash-hungry state and local governments cut spending.

Wall Street analysts surveyed by Thomson Reuters predict the economy expanded at a 2.5 percent pace in the second quarter. If they are right, that would be down from a lackluster 2.7 percent pace in the first three months of the year. And, it would mark the second straight quarter of slowing growth.

With the economy growing at such a subpar speed, unemployment - now at 9.5 percent - is likely to stay high.

It takes about 3 percent growth just to create enough jobs to keep pace with the population increase.

Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the Obama administration nor the Federal Reserve expect that to happen.

Gross domestic product measures the value of all goods and services - from machinery to manicures - produced within the United States. It is the best gauge of the nation's economic health.

Risks to the recovery have grown, and some fear it could stall out.

Consumer confidence is tumbling. The unemployed face fierce competition to find work. Those with jobs are seeing scant wage gains. Home values - often Americans' single-biggest asset - are weak. That explains why consumers are not in a mood to spend lavishly like they usually do in the early stages of an economic recovery.

It's also a major reason why the pace of this recovery is considered feeble by historical standards. When the country was recovering from a severe recession in the early 1980s, for instance, the economy's growth exceeded 7 percent for five quarters.

"The recovery looks subpar and risks are growing," said Chris Rupkey, economist at the Bank of Tokyo-Mitsubishi.