| Strong auto sales have been boosting personal spending and economic growth. Chevy trucks line the lot of a dealership in Murrysville, Pa. (Gene J. Puskar / Associated Press / March 28, 2013) |
WASHINGTON -- The picture of the American economy has improved -- looking forward and backward.
Economic output in last year's fourth quarter was revised slightly higher, putting the nation's growth rate for all of 2012 at a modest 2.2%.
The Commerce Department said Thursday that U.S. gross domestic product, or total goods and services produced, expanded at an annual rate of 0.4% in the fourth quarter, after adjusting for inflation. That is down from 3.1% in the third quarter, but better than the 0.1% real GDP growth in the government's previous estimate of fourth-quarter activity.
The weakness in the fourth quarter output was exaggerated by an unusually big drop in federal defense spending and a sharp reduction in inventory accumulation. Real personal spending actually picked up a bit in the fourth quarter, and housing and nonresidential investments both saw strong gains.
Corporate profits grew by a healthy 2.3% in the fourth quarter from the previous quarter. And consumers' after-tax incomes surged at year's end along with dividend and bonus payments, ahead of expected tax increases, the Commerce data show.
Since the recovery officially began in mid-2009, the underlying growth rate of the economy has been a little above 2%, considered by many economists as sluggish given the deep recession.
But this year's opening quarter is looking much better.
Despite the fiscal head winds of higher payroll taxes and government spending cuts, the U.S. economy is set to grow 3.5% in the first quarter, according to a new forecast Thursday by the Organization for Economic Cooperation and Development, a group of mainly advanced economies.
The OECD cited the Federal Reserve's stimulus policy, saying that "monetary easing appears to be feeding through to the real economy as household consumption has picked up and the housing sector has begun to rebound."
Many private economists are not quite that bullish, uncertain about the effects of higher taxes on consumer spending, which accounts for 70% of American economic activity.
The latest OECD forecast sees U.S. GDP growth in the second quarter slipping back to 2% as fiscal spending cuts weigh on the economy.
Still, the near-term outlook for the U.S., as well as some other major economies, has brightened in recent weeks.
The OECD predicted that Japan's economy, the world's third largest, would expand 3.2% in the first quarter, thanks to fiscal and monetary stimulus. Germany, the fourth-biggest economy, is expected to rebound as well, with its GDP advancing 2.3% in the first quarter, even as several other major Eurozone countries remain stuck in the mud.
China, the world's second-largest economy behind the U.S., is likely to grow well above 8% in the first half of this year, the OECD said.
Forget 15 percent. Or even 20 percent. The new normal in restaurant tipping is to give a full 25 to 30 percent of the tab, the New York Post reports. In other words, for a night out in New York City, you can expect to actually pay $130 for a $100 dinner.
It's not just New York City where tips are heading north; other cities are also experiencing "tip creep." New research from a professor at Cornell University’s School of Hotel Administration studied 9,000 receipts from a restaurant in Poughkeepsie, N.Y., and found that more than one-third of patrons left a tip that was more than 20 percent.
As a transaction, tipping is meant to represent reward or incentive for food service. But in fact the additional money has become an essential income source for workers, many of whom barely make minimum wage.
According to the Bureau of Labor Statistics, food and beverage service workers made a median hourly wage of $8.72 per hour in 2010. About half of all states allow restaurants to pay servers $2.13 per hour, as long as the employer makes up the difference if the server doesn't reach the standard minimum wage after tips.
But not all restaurant owners -- or dining patrons -- got that memo.
Some restaurants have taken to adding an automatic gratuity for diners who are foreigners (and thus not accostomed to American tipping standards), while other have taken more drastic measures. According to one report earlier this year, a family was locked inside a restaurant in Houston after refusing to pay 17 percent gratuity.
But owners can be the problem, too. Celebrity chef and restaurant magnet Mario Batali settled a lawsuit earlier this year for more than $5 million over improperly withheld tips.
Meanwhile, some food and beverage industry workers are getting more creative about soliciting tips: A new electronic tip jar called the DipJar allows patrons to swipe a plastic card rather than tip with cash.