The New Year is approaching, but economists aren’t exactly bringing good tidings. According to the latest forecast released by the National Association for Business Economics (NABE) on Monday, the U.S. economy will remain weak in 2011.
“Growth is expected to be moderate,” NABE President Richard Wobbekin said. According to Wobbekin, NABE panelists believe that high levels of federal debt, a persistent unemployment rate and the rising level of prices of goods will hamper significant improvements.
NABE’s latest forecast is based on predictions made by a panel of 51 economists, who were polled between Oct. 21 and Nov. 4.
The association’s latest survey found economists now expect the gross domestic product (GDP), which is considered the best measure of economic growth, to increase by 2.7% this year, up slightly from last month’s forecast of 2.6%.
However, NABE still expects the GDP will only improve by 2.6% in 2011, far below the 3.5% that economists believe is needed to bring down unemployment.
Consequently, unemployment is expected to remain high in the New Year. Economists said the unemployment rate would persist at 9.5% or higher through the first quarter of 2011 before easing slightly to 9.2% by the year’s end. What's more, only 150,000 jobs are expected to be added during the remaining months in 2010, and no more than 170,000 jobs per month are expected to be added next year.
Economists didn’t have good things to say about consumer spending, either. Holiday retail sales are expected to only increase by 2.5% from last year and that the longer overall outlook on spending remains modest.
According to NABE, its latest forecast marks the weakest post-recession job recovery on record and reflects the prevailing view that the economy will continue to struggle against financial headwinds.
Many survey respondents (40%) said they would characterize our current economic growth as “sub-par with severe wealth losses and onerous debt burdens inhibiting spending and lending.”
Economists also said, however, that the likelihood of slipping back into a recession, or experiencing a double-dip, is relatively low. The other bright spot in the survey involved business spending, with sustained, double-digit growth projected to take place through the end of next year.
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