GDP growth suggests end to U.S. recession

The U.S. economy grew 3.5 per cent in the third quarter, slightly better than the market forecast of 3.2 per cent, and its best showing in two years.

The report by the U.S. Department of Commerce suggests that the worst recession since the 1930s has ended, at least by the technical definition, and a new phase of fragile recovery has begun.

Economists define a recession as two consecutive quarterly declines in GDP growth. The U.S. economy has posted negative quarterly GDP growth since the third quarter of 2008.

Though other indicators such as industrial output, jobs and consumer spending remain worrisome, the growth in GDP means that in technical terms, the recession has ended in the United States.

Fuelled by government-supported spending on cars and homes, the growth in GDP was the strongest signal yet the economy has entered a new phase of recovery.

The report "suggests the U.S. has finally shaken off the shackles of the deep economic recession and is beginning the economic recovery process," Millan Mulraine, an economist strategist at TD Securities, said in a commentary. However, with so much of the growth coming from government stimulus, he said, "we expect GDP growth in the coming quarters to be less robust."

Also, the U.S. government says the number of people claiming jobless benefits for the first time dropped slightly last week, evidence that the labour market remains weak even as the economy is recovering.

The Labour Department said Thursday its tally of newly laid-off workers seeking unemployment insurance fell by 1,000 to a seasonally adjusted 530,000 last week. Analysts expected a steeper drop to 521,000.

Still, the four-week average, which smooths out volatility, fell for the eighth straight week to 526,250, its lowest level since early January. Claims are slowly declining as companies lay off fewer workers.

The number of people continuing to claim benefits, meanwhile, has dropped sharply by 148,000 to 5.8 million, below analysts' expectations.