Industry economists say the U.S. economy will continue to expand at a moderate pace through next year, boosted by a rise in consumer and, especially, business spending — but joblessness is expected to remain high and the pace of the housing recovery will be sluggish.
A new survey from the National Association for Business Economics found that economists are more optimistic about the pace of the recovery than they were in November.
The 47 economists polled in the survey expect the economy to grow 3.3 percent this year. That's up from November's prediction of 2.6 percent growth. It's also higher than last year's 2.9 percent growth rate. Pent-up demand from consumers ready to spend again, as well as strong growth in Asia, are contributing to the faster pace of growth, as is business spending on new equipment and software.
"Panelists do remain confident about the expansion's durability, but are concerned about high levels of government deficits and debt, excessive unemployment, and rising commodity prices," said Richard Wobbekind, associate dean of the Leeds School of Business at the University of Colorado and the president of NABE, in a statement.
For 2012, the panel expects the economy to grow 3.4 percent when compared with 2011. This is "consistent with the moderate pace of growth" that usually takes place during recoveries from severe financial crises such as the meltdown that led to the Great Recession, the report said.
Nearly 40 percent of the survey's respondents think that the recovery will continue to grow moderately, while one third were more optimistic. Only 11 percent — or about five of the respondents — described the growth as ""subpar with severe wealth losses and onerous debt burdens inhibiting spending and lending." That's down sharply from the 40 percent who thought this in November.
The labor market is improving slowly, with the number of jobs employers add to their payrolls expected to average 178,300 this year, but rising throughout the year. The economists predict that 210,000 jobs will be added to payrolls in each of the last three months of 2011.
At the same time, unemployment will stay high, with the rate averaging 9.3 percent in the first quarter of this year and inching slightly lower to 9 percent in the fourth. By the last quarter of 2012, the joblessness rate will still be high — 8.2 percent.
The outlook for consumer spending has improved, and is now expected to grow 3.2 percent this year. That's up from a 2.4 percent growth forecast in November. In 2012, spending is expected to rise by 2.9 percent, which is the same as the annual growth rate over the past 20 years.
The NABE panelists see business spending as a bright spot, with double-digit percentage growth in spending on equipment and software in both 2011 and 2012. But spending on structures remains weak, expected to grow just 1.4 percent in 2011. By next year, however, this is expected to grow by 4.8 percent.
The panel raised its outlook for the federal deficit. In 2011, the federal government deficit is now expected to reach $1.4 trillion, up from the earlier forecast of $1.1 trillion. The panelists see the federal debt as "their single greatest concern going forward, even exceeding worries about high unemployment, and far greater than concerns about either inflation or deflation," the report said.
The housing market is expected to stay tepid, with most panelists expecting home prices to bump along "at a cyclical low," the survey found.
The survey was conducted between Jan. 25 and Feb. 9.