Forecasts show economy on rise
WASHINGTON — 2011 should be a happy new year for the U.S. economy, according to forecasts from mainstream economists, although their predictions over the past several years have been about as accurate as the local weatherman’s.
Most economists predict growth in the range of 3 percent next year. The more optimistic ones see 4 percent.
That’s a remarkably positive outlook compared to the past three years, but it’s not enough to push unemployment down much.
“The story for growth I think is really quite simple. You come into this period with massive headwinds … so you’re almost guaranteed a weak recovery,” said Ethan Harris, the head of developed markets economics in New York for Bank of America Merrill Lynch Global Research.
Harris projects a growth rate of around 3 percent next year despite the “massive headwinds” from Europe’s debt crisis, new regulations on finance, high unemployment, the continuing hangover from the housing bust, and a host of other challenges.
His projection is right where 55 forecasters surveyed by the Wall Street Journal put it, and 3 percent isn’t bad in normal times. But when it’s coming out of a typical recession, the economy tends to grow at twice that rate.
The mild recovery means the jobless rate is likely to remain uncomfortably high next year. The U.S. economy added 1.2 million jobs from December 2009 to November 2010, but that’s 300,000 fewer jobs than were lost in only the first two months of 2009. And 150,000 jobs are needed each month simply to absorb new entrants to the work force.
But unemployment trends will dominate how Americans feel about their economy, and how they spend. The unemployment rate in November stood at 9.8 percent, and economists expect it to rise into double digits early next year as people who exited the labor force return to seek work in the reviving economy. Most forecasts see the jobless rate remaining above 9 percent all of next year.