(Updates with Obama comments in third-fourth paragraphs.)
Jan. 27 (Bloomberg) -- The White House called anew for passage of a payroll tax cut extension after the government reported less-than-expected growth in the economy in the fourth quarter of 2011.
Extending the tax break until the end of 2012 is “the most pressing matter” on President Barack Obama’s agenda, spokesman Jay Carney said. The break is set to expire Feb. 29.
Obama said that while economic growth needs to improve, the country is “moving in the right direction.”
“We righted the ship, we did not tip into a Great Depression,” Obama told Democratic members of the U.S. House at a meeting today in Maryland.
Obama has been attacked by his Republican rivals for a weak economy, including a jobless rate of 8.5 percent that must come down or it will dim Obama’s chances for re-election.
The only U.S. president re-elected since World War II with a jobless rate above 6 percent was Ronald Reagan. The unemployment rate on Election Day 1984 was 7.2 percent, having dropped almost 3 percentage points in the previous 18 months.
The Commerce Department reported today the economy expanded 2.8 percent in the fourth quarter, less than forecast, as consumers trimmed spending and government agencies cut back.
Make or Break
“This is a make-or-break moment for the middle class, and those who are struggling to get into the middle class,” said Alan Krueger, chairman of the White House Council of Economic Advisers, in a statement. “While the continued expansion is encouraging, faster growth is needed to replace the jobs lost in the recent downturn and to reduce long-term unemployment,” he said.
The economy must grow at an annual rate of 2.5 percent or more to reduce the unemployment rate, most economists say.
Gross domestic product, the value of all goods and services produced, climbed at a 2.8 percent annual pace following a 1.8 percent gain in the prior quarter, figures showed. The median forecast of 79 economists surveyed by Bloomberg News called for a 3 percent increase.
The Commerce Department said it was the economy’s 10th straight quarter of growth.
Obama, campaigning in Michigan, appealed today to Congress for action on jobs and job training.
The government should help make sure America is “selling stuff all around the world, products stamped with those three proud words ‘Made in America,’” Obama said at the University of Michigan in Ann Arbor.
Obama was capping a three-day swing through Iowa, Arizona, Nevada, Colorado and Michigan.
The economy is reviving four years after the start of the recession, “though we’ve not yet reached escape velocity,” said Adam Hersh, an economist at the Center for American Progress in Washington.
The economy is $96 billion larger than December 2007 when the recession began, he said.
The Fed said Jan. 25 it plans to keep interest rates low through at least late 2014. The central bank is considering more bond purchases to boost growth, Chairman Ben S. Bernanke said.
“We’ve got some momentum but growth is too slow and there’s still too much fragility and too much slack in the system,” Jared Bernstein, former chief economist to Vice President Joe Biden, said in an interview. “Headwinds persist, and I worry about an oil-price spike. And stimulus is fading big-time.”
Risks include Europe’s debt crisis, potential shock from an unforeseen terror attack or natural disaster, confidence of consumers who account for 70 percent of the economy or political intransigence in Washington over extending the payroll tax cut to the end of the year, he said.
“There’s no question that would hurt near-term growth,” said Bernstein said. The 2.8 percent is “a decent pop” but “we shouldn’t get anywhere near the champagne.”
For 2011 as a whole, GDP rose by 1.7 percent, raising the level of real GDP after inflation 0.7 percent more than where it was at the start of the recession in the fourth quarter of 2007.
--With assistance from Alexander Kowalski in New York. Editors: Steven Komarow, Bob Drummond.
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