More than 40% of the 2.5% growth in first quarter GDP was supported by growing inventories -- not final sales of goods and services. Overall, final demand is advancing at a pace that will support subpar growth of about 2% -- perhaps less -- for the balance of the year.

U.S. corporations are reporting weak sales growth, even as profits advance, but the cost cutting necessary to accomplish that dichotomy will result in continued slow hiring and perhaps a wave of layoffs. Weakening conditions in Europe make layoffs more likely, and the danger that Southern Europe's severe recession could spread north to Germany and across the Atlantic to the U.S. and Canada is quite real.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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