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Economy ends 2004 upbeat, lifts job hopes

Index's 3.8 rise eases fears of inflation

WASHINGTON -- The economy closed out 2004 with decent momentum and appears to have picked up some speed since, raising hopes of a better climate for jobs. With the economy chugging ahead -- but not too rapidly -- Wall Street staged a jubilant rally.

The broadest barometer of economic health, the gross domestic product, advanced at an annual rate of 3.8 percent over the final three months of last year, the Commerce Department reported yesterday.

The rate, the same as the one estimated a month ago, improved upon the initial reading of a 3.1 percent pace for the fourth quarter.

''The economy at the moment has a pretty good tail wind," said Anthony Chan, senior economist at JP Morgan Asset Management.

Economists said the economic performance from October through December was admirable, even when compared with the 4 percent growth rate in the third quarter. That was a pace some analysts had hoped would continue over the last three months of 2004.

On Wall Street, the GDP showing helped to calm investors' fears that the economy may be growing too fast. The Dow Jones industrials surged 135.23 points to 10,540.93. It was the Dow's biggest one-day point gain of the year.

Looking at the January-to-March period, the economy is expected to grow at a rate of about 4 percent or slightly above, according to some analysts' projections. Economic growth probably will slow over the next three months, but will still be healthy, they said.

If that outlook prevails, it should help generate respectable job gains, analysts said.

The overall economy has performed better than the job market, where progress has proved uneven.

The economy added a net 262,000 jobs in February, the most since October. With the government releasing the March employment report tomorrow, analysts are forecasting a gain of about 220,000 jobs for the month.

President Bush wants to see the economy on firm footing as he tries to sell the public on his vision of overhauling Social Security. He is promoting the idea of letting workers set up individual investment accounts in stocks and bonds, using a big chunk of payroll taxes to do that.

Federal Reserve policy makers are feeling upbeat about the economy's growth, yet are concerned about a potential pickup in inflation. Last week, for the seventh time since June, they again raised interest rates. An additional increase is expected at the Fed's next meeting, on May 3. An inflation gauge tied to the GDP report showed that prices -- excluding food and energy -- rose at a rate of 1.7 percent in 2004's final quarter.

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