Weighed down by a housing slump, the economy in 2007 will log its most sluggish growth in five years. But that showing should not cause businesses to really clamp down on hiring, economic forecasters say.
A forecast released Monday by the National Association for Business Economics puts the growth of the gross domestic product at 2.2 percent for this year. The rate was 2.7 percent in the group’s previous survey, in February.
If the latest prediction proves correct, the growth rate would be the weakest since 2002. Back then, the fragile economy was emerging from a recession and grew by just 1.6 percent.
“The expansion has descended from its cruising altitude,” said the association’s president, Carl Tannenbaum, chief economist at LaSalle Bank.
The main culprit is the sour housing market. It fell into a slump last year after a five-year boom. Nearly half of the forecasters think the market will not reach its bottom until this winter or later.
Even so, the employment climate should continue to weather the fallout from the housing slump, the forecasters said.
They predict the unemployment rate for 2007 will match last year’s rate of 4.6 percent, a six-year low.
For the most part, employers have shown a decent appetite to hire even as the economy, as measured by the GDP, has lost momentum.
GDP is the value of all goods and services produced within the United States. It is considered the best barometer of the country’s economic standing.
For next year, the forecasters believe the economy will grow by 2.9 percent — somewhat sluggish and lower than the earlier forecast of 3 percent.
The unemployment rate would edge up to 4.8 percent next year, according to the survey of 48 forecasters that was conducted April 19 through May 8.
More than half of the forecasters said there was at least a 25 percent chance of a recession getting under way within the next year. Earlier this year, former Federal Reserve chief Alan Greenspan put the odds of a recession at one in three.
On the inflation front, the forecasters predicted consumer prices would rise by 2.5 percent this year, compared with the February forecast of a 1.9 percent increase. The reason for the more bearish inflation outlook: rising prices for gasoline and other energy products.
Gasoline prices climbed to $3.10 a gallon nationwide in the middle of May, compared with $2.97 at the end of April, the Energy Department says.
The Federal Reserve is predicting that inflation will moderate as the economy cools.
The Fed on May 9 held interest rates steady, extending a nearly yearlong period of stability that has positives for savers and borrowers. It left an important interest rate unchanged at 5.25 percent.
The forecasters predicted that rate would not budge for the rest of this year.