Chicago: Economists expect the US recovery to remain "firmly on track" over the next two years though job growth is likely to remain slow, according to a new survey.
The latest outlook from The National Association for Business Economics (NABE), which was set to be released yesterday, sees regular job gains resuming this quarter but no drop in unemployment below nine per cent for another year.
Consumer spending will be relatively sluggish as consumers continue to dig themselves out of debt but inflation is expected to remain subdued, and home prices should rise at a rate slightly above inflation in 2010 and 2011.
"We see a healthy expansion underway, although it will take time to reduce economic slack and repair damaged balance sheets," said Lynn Reaser, the group's president and chief economist at Point Loma Nazarene University.
The NABE forecast is largely consistent with its last quarterly forecast in November and reflects an economy in slow-but-steady recovery mode.
Its prediction that unemployment will decline only to 9.6 per cent by the fourth quarter also mirrors the Federal Reserve's forecast last week that the jobless rate will remain high over the next two years because businesses are likely to stay cautious about taking on more workers. The NABE economists foresee an average monthly gain of 103,000 jobs this year.
The survey was conducted before the government released the January unemployment rate this month, showing an unexpected drop in unemployment to 9.7 per cent from 10 per cent.
Early-phase recovery
Gains in discretionary spending by both businesses and households should power what the economists' group characterised as a recovery still in its early phase. Still, consumer spending is expected to rise only 2.2 per cent this year before increasing 2.8 per cent next year, according to the poll. The economists attribute that lackluster rate mostly to past wealth losses and only modest employment gains.
Businesses are expected to play a bigger role in the expansion. That will partially reflect strong gains in corporate profits, forecast to be up 24 per cent over the next two years.
Participants in the survey consider the housing market rebound sustainable. Home prices are predicted to rise 1.6 per cent in 2010 and an additional 2.6 per cent in 2011. Those may not be huge increases but they would still represent an important watershed for the economy, the NABE noted, after the declines of the recent past.
The stock market is expected to climb significantly in 2010 and 2011. On average, the economists predict the Standard & Poor's 500 index will rise 23 per cent over the next two years. The S&P 500 jumped 3.1 per cent last week, though it's still down 29.1 per cent from its high.
