Economy expands almost two percent in fourth quarter

The U.S. economy grew 1.9 percent between October and December, government data showed Friday morning, capping off a long period of tepid expansion under the Obama administration.

Growth in the gross domestic product, the total output of goods and services in the country, was just below average growth of 2.1 percent seen since the beginning of 2010.

'I know most people say, ‘Oh, two percent isn't that great,' but in the current world it is. Many countries would be envious,” said Beata Caranci, chief economist at TD Economics.

For the full-year 2016, the economy expanded 1.6 percent, government data showed, down from an increase of 2.6 percent the previous year.

The data was the first reading from the Commerce Department and will be revised twice more in coming months. The economy surged to 3.5 percent growth in the third quarter, driven partly by an unusually large volume of soybean exports.

Economists look fairly positively on the progress that the United States has made since the recession. But current GDP growth still is far below the four percent target President Donald Trump has said he is aiming for.

To reach that ambitious target, the United States will have to overcome significant challenges, such as a working age population that is shrinking as baby boomers retire, and sluggish productivity growth, economists said.

While GDP growth has been somewhat tepid, data from the jobs market gives a picture of a stronger economy. In December, the U.S. labor market saw its 75th straight month of job growth, while wages rose 2.9 percent from the year before.

'The economy is growing at a clearly above-trend pace, meaning we're using up labor-market slack, and you can see it in the employment numbers, and you can see it in general growth numbers. A year ago, there was a bit more of a question mark around that,” said Jan Hatzius, chief economist at Goldman Sachs. 'Now we've moved beyond that.”

Hatzius said it is clear the nation is 'at least in the neighborhood” of full employment, the point at which most people in the United States who want a job will have one.

'If we get continually strong growth, and especially if that is boosted further by tax cuts and spending increases, then the Fed is going to want to lean against that,” he said.

The U.S. Federal Reserve is unlikely to raise rates at its meeting next week, analysts say, but it could hike rates two or three times in 2017 to offset the risk of inflation in a strengthening economy. Those moves may depend heavily on whether the Trump administration rolls out policies that could further stoke inflation, including tax cuts and infrastructure spending.

'We're operating under a cloud of uncertainty at the moment, and we have to wait and see what changes occur and factor those into our decision-making as we gain more clarity,” Janet Yellen, chairwoman of the Federal Reserve system, said at a news conference in December.