The U.S. economy grew at an annualized rate of 2.8 percent in the fourth quarter of 2011, the Bureau of Economic Analysis reported.

With Europe in crisis and the world teetering on the brink of a new global recession, that quarterly growth figure is a welcome ray of sunshine in an otherwise bleak outlook. The nation accounts for 23 percent of total world GDP.

The 2.8 percent headline figure represents the real (adjusted for inflation) growth in gross domestic product (GDP) between the third and fourth quarters of 2011, adjusted to account for ordinary seasonal variability and converted to an annual growth rate.

It compares favorably with both the 1.8 percent figure for the third quarter and the economy’s long-term average annual growth rate of 2.5 percent over the past two decades.

Unfortunately for the United States and its trading partners, the news isn’t as good as it seems.

Final sales — defined as GDP less change in private inventories — increased at a rate of only 0.8 percent in the fourth quarter.

In other words, only 0.8 percent of the fourth quarter’s growth came from actual sales of goods and services. The other 2 percent came from businesses building up their inventories.

What does that mean? Here are two possible interpretations.

The optimistic interpretation is that businesses were accumulating inventory in late 2011 in anticipation of high sales figures in 2012. Seen in this light, inventories can be a leading economic indicator. They suggest stronger economic growth in 2012.

The pessimistic interpretation is that inventories rose in the fourth quarter of 2011 because businesses couldn’t sell their goods. With sales slowing, inventories pile up. This view doesn’t bode well for 2012.

While either interpretation could be correct, there’s strong circumstantial evidence for the pessimistic interpretation.

When measured in actual dollars, without adjusting for inflation, nominal GDP rose at an annual rate of 3.2 percent annual rate in the fourth quarter, compared with a 4.4 percent rate in the third.

The only reason that real GDP (which is adjusted for inflation) rose faster in the fourth quarter was that inflation declined from 2 percent to less than 1 percent.

This means that GDP growth actually slowed in the fourth quarter of 2011, but inflation slowed even more, resulting in a net increase in real GDP growth.

Strong demand causes inflation to rise; weak demand causes inflation to fall. Falling inflation indicates that demand is weak. This suggests that the pessimistic interpretation of rising inventories is probably the right one.

The 27 January fourth quarter GDP figures are only “advance” estimates, not final results. Revised figures will be released on Feb. 29 and final figures on March 29.

GDP figures are often revised downward after the initial estimates have been published. Inventory statistics in particular have been a source of error.

The U.S. economy has shed more than 6 million jobs since the beginning of the recession in December 2007.

Due to a rise in part-time employment, the number of Americans employed in full-time jobs is down more than 8 million.

According to the Bureau of Labor Statistics, the economy is currently creating about 150,000 net new jobs per month. Even accounting for retirees, that barely keeps pace with the rate of new graduates entering the labor market each year.

There is little relief in sight. At the Fed’s latest Federal Open Market Committee (FOMC) meeting January 24-25, expectations were muted.

The FOMC said in its official statement that it “currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

In promising to keep interest rates “exceptionally low” the FOMC indicates that it expects the US economy to remain sluggish for at least the next three years.

Officially, the economy entered recession in December 2007 and emerged into recovery in July 2009. The recovery, however, has been slow and relatively jobless.

In the experience of most ordinary Americans, the recession that started at the end of 2007 is not yet over. If the FOMC expects current economic conditions to continue through the end of 2014, that suggests a grand total of seven years of slow going.

This raises the question: when does a recession become a depression? There’s no “official” definition of a depression used by U.S. or international authorities, but the current experience must come close.

Full-year 2011 real GDP growth for the United States stood at 1.7 percent. Factoring in population growth, real GDP-per-capita was roughly the same last year as it was in 2005.

It’s certainly good news that the U.S. economy is growing again, but if the Federal Reserve forecasts are right it will be a long time before Americans have anything much to cheer about. Depression or no depression, Americans are in for a long, hard slog.

Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney and an associate fellow at the Institute for Policy Studies. An earlier version of this post appeared on the website.

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