By Martin Crutsinger

WASHINGTON (AP) -- The American economy may not be truly healthy yet, but
it's healing.

The 2.8 percent annual growth rate reported Friday for the fourth quarter was
the fastest since spring 2010 and was the third straight quarter that growth has
accelerated.

Experts cautioned, however, that the pace was unlikely to last and that it's
not enough to sharply drive down the unemployment rate.

Unemployment stands at 8.5 percent - its lowest level in nearly three years
after a sixth straight month of solid hiring. And Friday's Commerce Department
report suggests more hiring gains ahead.

For the final three months of 2011, Americans spent more on vehicles, and
companies restocked their supplies at a robust pace.

Still, overall growth last quarter - and for all of last year - was slowed by
the sharpest cuts in annual government spending in four decades. And many people
are reluctant to spend more or buy homes, and many employers remain hesitant to
hire, even though job growth has strengthened.

The outlook for 2012 is slightly better. The Federal Reserve has estimated
economic growth of roughly 2.5 percent for the year, despite abundant risk
factors: federal spending cuts, weak pay increases, cautious consumers and the
risk of a European recession.

Economists noted that most of the growth in the October-December quarter was
due to companies restocking their supplies at the fastest rate in nearly two
years. That pace is expected to slow.

"The pickup in growth doesn't look half as good when you realize that most of
it was due to inventory accumulation," said Paul Ashworth, an economist at
Capital Economics.

Ashworth expects annualized growth to slip below 2 percent in the current
January-March quarter. Other economists have similar estimates.

Stocks opened lower after the government reported the growth figures. The Dow
Jones industrial average closed down about 74 points. Broader indexes were
mixed.

In a normal economy, roughly 3 percent growth is a healthy figure. It's
enough to keep unemployment down - but not so much growth as to ignite
inflation.

But coming out of a recession, much stronger growth is needed. By some
estimates, the economy would have to expand at least 5 percent for a full year
to drive down the unemployment rate by 1 percentage point.

In many ways, the economy did end 2011 on a strong note. Companies invested
more in equipment and machinery in December.

People are buying more cars, and consumer confidence has risen. Even the
depressed housing market has shown enough incremental gains to lead some
economists to detect the start of a turnaround.

In the final three months of 2011, consumer spending grew at a 2 percent
annual rate. That was up modestly from the July-September quarter. Consumer
spending is critical because it fuels about 70 percent of the economy.

Much of the growth was powered by a 15 percent surge in sales of autos and
other long-lasting manufactured goods.

Incomes, which have been weak because of still-high unemployment, grew ever
so slightly, at a tepid 0.8 percent annual rate, following two straight
quarterly declines. Unless pay picks up, consumers who have dipped into savings
in recent months may pull back.

"Consumers don't have much income growth, and to even achieve a 2 percent
growth rate in spending in the fourth quarter, they had to run down their saving
rate," said Nigel Gault, chief economist at IHS Global Insight.

And government spending at all levels fell at an annual rate of 4.6 percent
in the fourth quarter and 2.1 percent for the year - the sharpest drop since
1971. Defense cuts at the start and end of the year were a key factor. With
Congress aiming to shrink budget deficits, the likelihood of further federal
spending cuts could weigh on the economy.

Economic growth is measured by the change in the gross domestic product, or
GDP. The GDP reflects the value of all goods and services - from machinery to
manicures to hotel bookings to jet fighters - produced in the United States.
Friday's estimate of GDP growth was the first of three for the October-December
quarter. The figure will be revised twice, in February and then in March.

Ian Shepherdson, an economist at High Frequency Economics, is among the more
optimistic analysts. He said he thought business investment in capital goods
would be stronger and consumer spending higher this year.

Many fear that a likely recession in Europe could cool demand for U.S.
manufactured goods. Growth would slow. Without many more jobs and better pay,
consumer spending could weaken.

The Fed signaled this week that a full economic recovery could take at least
three more years.

Although things may not be good, they're getting better.

Gault predicts the economy will create an average of 150,000 jobs a month in
2012 based on his expectation that the year will be slightly stronger than 2011.
Last year, the economy created an average 133,000 jobs a month.

"We are starting to see improvements in the housing market, and consumers are
working down their debt levels," Gault said. "That is all good and will help us
this year."