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U.S. economy returns to growth

The gross domestic product rose at a 3.5% annual rate in the third quarter, the government says. The expansion unofficially marks the end of the recession that began at the end of 2007.

Don Lee

10:14 AM EDT, October 29, 2009

Washington Bureau

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The U.S. economy expanded at an annual rate of 3.5% in the third quarter, unofficially marking the end of the worst recession since World War II.

The growth reported today by the Commerce Department for the three months that ended Sept. 30 snapped four straight quarters of economic contraction and was driven largely by a rebound in consumer spending supported by the federal stimulus package and improved business spending that included a revival of homebuilding..

The increase in the gross domestic product, the total value of goods and services produced in the country, is the evidence most economists have said is needed to declare victory against the recession.

But today's preliminary report doesn't mean the economy is in good shape. Its expansion in the third quarter only partly offsets its dramatic 6% decline last fall and winter. A number of forecasters are predicting weaker expansion in the fourth quarter and in the early part of 2010.

And the country's unemployment rate, which reached a 26-year high of 9.8% last month, is expected to remain high for some time

Peter Morici, an economics professor at the University of Maryland, said the economy needed to have an annual growth rate of 3% or more over at least three quarters to add enough jobs to bring down unemployment.

"I don't see a rosy picture," he said before the GDP figure was released.

Although a recession is commonly defined as two or more straight quarters of GDP decline, economists rely on the National Bureau of Economic Research, a private, nonpartisan research group, to mark the beginning and end of business cycles. The bureau, which considers GDP and employment data as primary factors in determining a recession's length, said the latest recession began in December 2007.

The White House said it sees evidence of an impact from the $787-billion economic stimulus act approved by Congress in February in the newest quarter's economic report.

"This is in stark contrast to the decline of 6.4 percent annual rate just two quarters ago,'' said Christina Romer, chair of the White House Council of Economic Advisers.

Maintaining that the American Recovery and Reinvestment Act contributed between 3 and 4 percentage points to real GDP growth in the third quarter, Romer said: "This suggests that in the absence of the Recovery Act, real GDP would have risen little, if at all, this past quarter."

"After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction,'' Romer said. "However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered.

"it will take sustained, robust GDP growth to bring the unemployment rate down substantially,'' she said in a statement issued by the White House this morning. "Such a decline in unemployment is, of course, what we are all working to achieve."

don.lee@latimes.com