Record Residential Building Drop Slowed Down Economy in the Fourth Quarter
- Jan 30, 2008
Washington, D.C.–Reduced spending and the largest decline in residential construction in 26 years caused U.S. economic growth to slow significantly in the fourth quarter, according to data released Wednesday by the Commerce Department.After three consecutive months at a 4.9 percent pace, economic growth declined to an annual rate of 0.6 percent in October through December, Bloomberg reports.Home building fell 24 percent in the quarter–the eighth drop in a row and the largest since 1981–which zapped 1.2 percentage points off growth. The U.S. is in the midst of its biggest housing decline since 1982: In the past two years, residential building has dropped 29 percent.As the subprime lending system fell apart and the global credit crisis swelled to new levels, the country’s six-year expansion felt the effect. Bloomberg expects the Federal Reserve to cut interest rates Wednesday as a result.However, a report from payroll company ADP Wednesday indicated the employment sector might not be as bleak as the housing industry. The report found that U.S. companies added 130,000 workers in January–a larger increase than economists had expected after December’s disappointing figures, which showed a gain that was less than half the average monthly increase of the past five years.The economy grew just 2.2 percent in all of 2007–reaching $11.6 trillion, after adjusting for inflation–the least amount in five years, according to Bloomberg.