Obama Seeks Small Biz Aid as Recovery Inches Along

(Oct. 29) -- American economic growth picked up over the summer but not enough to substantially improve the jobs market, and President Barack Obama used the news to push a program aimed at getting small businesses to hire and invest.

U.S. gross domestic product, the broadest measure of goods and services produced within the country, grew at an annual rate of 2 percent in the third quarter, up from a 1.7 percent pace in the spring, the Commerce Department said today.

Consumer spending -- by far the most important engine of U.S. economic growth -- also grew faster and more rapidly than it has in any quarter since the end of 2006, while business investment in equipment, computers and software stayed strong. But Americans continued to spend less on their homes, reflecting the persistent weakness in the housing market.

And as the tepid employment updates from throughout the summer showed, the growth just isn't fast enough to compensate for the more than 8 million jobs lost in the recession that ended last year -- the most poignant fact for a GDP report that is the last big economic news before next week's midterm congressional election and the Federal Reserve's deliberations on whether to take new action to help the economy.

Hours after the GDP numbers were released, Obama traveled to Stromberg Metal Works in Beltsville, Md., to promote what he called his "mission ... to accelerate that recovery" and a proposal to give some 2 million small and mid-size businesses $150 million in tax breaks.

"There are times, like in the past few years, when our economy is hit with as devastating a blow as we've seen, when credit is frozen, when demand is stalled; that we've got a responsibility to offer temporary and targeted incentives to spur investment, to knock down the barriers that stand in your way and to help create the conditions you need to grow and to hire and to prosper," he told the firm's executives and employees.

The tax breaks, first proposed by Obama last month, would let businesses like Stromberg take immediate 100 percent tax deductions on money spent on new equipment or plant upgrades through the end of next year, instead of writing off the value of those investments over several years.

"That means that they're going to have additional money to invest in workers and in other plants and equipment," Obama said. "And it will put a dent in the jobless rate that we've got to keep on working on because it's way too high right now."

The unemployment rate stood at 9.6 percent in September, and though Obama noted the number of private-sector jobs has been increasing for nine consecutive months, the pace has been one of an economy that's warm but still not heating up.

The third-quarter GDP numbers, the first of three government report cards on the period, did offer some signs of improvement.

Businesses increased their inventories at a 1.4 percent rate, considerably faster than the 0.82 percent pace in the spring, suggesting they expect more demand for the products they sell.

Americans were also socking away a bit less of their disposable income, and that slower savings rate could be a sign that the pervasive sense of caution among households and businesses is dissipating. The Conference Board's Consumer Confidence index for October, which came out Tuesday, indicated Americans' outlook has slightly improved.

The GDP report, about what most economists were expecting, isn't a game changer for Tuesday's elections, but it is bound to be closely examined by officials at the Federal Reserve who meet Tuesday and Wednesday and are expected to debate whether to use a crisis-era tool once again to flood money into the economy in a bid to boost hiring.