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Economic Growth Slows Sharply for Quarter

RENEE MONTAGNE, host:

NPR's business news starts with the economy barely growing.

The government's latest numbers on the economy are out, and they show a sharp slowdown at the end of 2007. Growth, as measured by the Gross Domestic Product, registered a mere 6/10 of a percent. That compares with brisk growth of almost 5 percent the previous quarter.

To help us figure out what these numbers mean, we go to NPR's Adam Davidson.

Good morning.

ADAM DAVIDSON: Good morning.

MONTAGNE: And what do the numbers tell us?

DAVIDSON: Well, I think there's no way to talk about this without saying this is really bad news. The GDP is the measure of the economic activity, pretty much all activity in the U.S. And this is telling us that it grew very anemically. Economists say that if the number is below 1 percent, it sort of feels like a recession to most people in the economy.

And so this means that in the last three months of 2007, the economy was really, really slow, and it was throughout the economy. We had - many had hoped that this slowdown would be restricted to the housing sector, which did fall way more dramatically than everything else. But now we learned that in a broad way many sectors of the economy fell, which is, obviously, worse news.

Now, I should note that this is a first estimate. The government often revises this number. It could go up. It could go down. So we don't fully know. But what we do know is that Federal Reserve is looking at this number very closely, and later today when they make their announcement this increases the likelihood that they will lower interest rates aggressively to get this economy growing again.

MONTAGNE: So did this mean, though, Adam, that a recession is in the cards?

DAVIDSON: It increases the likelihood that a recession is in the cards. This kind of slow growth, a big drop from the third quarter of 2007 to the final quarter, suggests that that drop could keep on dropping. But there's so much talk about recession in the media among economists; it's worth remembering we don't know yet. There's a decent chance that the economy will slow dramatically. It'll be painful for a little while and then it will start growing.

I think today there was some numbers that came out from the private payroll company ADP. That's kind of a hint of how employment is doing. And they showed that employment for January grew far faster than anyone expected, which was very good news. That suggests that maybe the economy isn't doing as badly as we thought.

We'll find out for sure when the government releases its data at the end of the week. But people will be paying very close attention to all of this economic data to figure out if we are in fact in a recession.

MONTAGNE: NPR's Adam Davidson. Thanks very much.

DAVIDSON: Thank you, Renee. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Renee Montagne
Renee Montagne, one of the best-known names in public radio, is a special correspondent and host for NPR News.
Adam Davidson
Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.