MercoPress. South Atlantic News Agency

US economy expanded 3% in the fourth quarter and incomes even faster

Higher incomes reflect more jobs and improved hiring

The US economy expanded as expected in the fourth quarter while personal income grew at a much faster pace than previously thought, according to the Commerce Department final estimate released Thursday.

GDP increased at a 3.0% annual rate, the quickest pace since the second quarter of 2010. The economy grew at a 1.8% rate in the third quarter.

However, personal income was 13.162 trillion dollars at a seasonally adjusted annual rate, 3.3 billion more than previously reported. Disposable income was 10.6 billion more than previously thought, likely reflecting the strengthening labour market.

Gross domestic income, which measures output from the income side, increased at a 4.4%, the fastest since the first quarter of 2010 - from a 2.6% rise in the third quarter.

The department also said after-tax profits increased at a 1.1% rate, slowing from 2.7% the prior quarter. The slowdown in profits reflects the increase in wage costs as companies step up hiring.

Rising incomes should help to cushion consumer spending against surging gasoline prices. Spending, which accounts for about 70% of U.S. economic activity, grew at an unrevised 2.1% pace in the fourth quarter.

While the economy grew solidly in the final three months of 2011, momentum has slowed this quarter amid signs of cooling in manufacturing, business spending and a pause in the housing market recovery - even as the labour market strengthens.

Federal Reserve Chairman Ben Bernanke this week said growth needed to accelerate to bring the unemployment rate down further. While he offered no sign that the US central bank would launch a third round of bond purchases or quantitative easing, Bernanke said all options remained on the table.