U.S. Economy Will Grow Faster Than Expected, Jobs to Return to Growth Next Year, Economists Say

The U.S. economy will grow faster than expected next year, but job growth will begin later than previously thought, according to a survey of business economists.

A panel of 48 economists surveyed by the National Association for Business Economics (NABE) showed gross domestic product (GDP) in the United States will grow by 3.2%, but job losses won't bottom until the first quarter of next year. A previous NABE forecast said employers would add 12,000 to payrolls in that quarter.

"While the recovery has been jobless so far, that should change," said Lynn Reaser, NABE president and chief economist at Point Loma Nazarene University in San Diego. "Within the next few months, companies should be adding instead of cutting jobs."

NABE's GDP forecast is one of the most optimistic forecasts for the United States. Money Morning's "Outlook 2010" series showed a range of U.S. growth between 1.0% and 2.0%.

The U.S. economy "will be lucky to do 2.0%" next year, Money Morning Chief Investment Strategist Keith Fitz-Gerald said. "The economy faces some very difficult challenges. There's a slight chance – depending on what happens with some outside factors – that the U.S. could do 2.5%, but I really doubt it. China could actually pull us along [to higher-than-expected growth], but those are some long odds."

NABE panelists still see "a relatively sluggish consumer upturn," but expect strong gains in housing, low inflation and a continuing rally of equities markets. Additionally, the majority of panelists believe the U.S. Federal Reserve's policies will keep inflation low, but are "extremely" concerned about the nation's high deficit, which will reach a record $1.6 trillion in 2009, the White House Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) said earlier this year.

Jobless Recovery

The current jobless recovery "will not remain jobless for long," the NABE said.

For the first time since 1983, unemployment cracked the psychologically important 10% barrier last month. Roughly 190,000 jobs in the United States were lost, surpassing economists' estimates of 175,000 payroll cuts.

NABE expects job growth in the fourth quarter of next year to match the number of losses the United States is currently experiencing.

"We have been losing jobs on the order of about 200,000 per month in the last couple of months," NABE's Reaser said in an interview with National Public Radio (NPR) . "We think a year from now, companies will be adding about 200,000 jobs per month."

Still, 61% of the economists polled by NABE say a complete recovery of more than 7.3 million jobs lost since the recession began in December 2007 won't happen until 2012. Although job growth will return next year, the average unemployment rate in the fourth quarter will be "stubbornly high" at 9.6%.

News and Related Story Links:

• National Association for Business Economics:
  NABE Panel: Recovery to Soon Lose "Jobless" Label
• Money Morning:
  Outlook 2010 Series
• Money Morning:
  U.S. Economy Will Dodge a Double-Dip Downturn, But Won't Escape Unemployment Woes During 2010 Jobless Recovery
• Money Morning:
  Jobless Recovery Category
• Money Morning:
  Unemployment Rate Cracks Double-Digit Barrier at 10.2%, Boosting the Odds of a "Jobless Recovery"
• NPR:
  Economists: Job Growth Will Resume "Within the Next Few Months"