Survey: U.S. Economy's Growth Will Slow This Year - Spokane, North Idaho News & Weather KHQ.com

Survey: U.S. Economy's Growth Will Slow This Year

USATODAY.COM - The U.S. economy's growth will slow this year after a blast of stronger growth in late 2011, leaving the 8.5% unemployment rate about where it is now on Election Day, according to USA TODAY's quarterly survey of economists.

The economy will grow at an 2.2% annual rate the first half of 2012 after an estimated 3.1% gain in fourth-quarter gross domestic product, according to the median forecast of the 48 economists surveyed. The government reports on fourth-quarter GDP Friday.

The biggest reason for slower growth is that a late-2011 bounce back from the effects of the Japanese earthquake last March won't last, according to Diane Swonk, chief economist at Mesirow Financial. Slower growth will help keep unemployment at 8.4% or higher through year's end, economists predict.

"The little improvement we saw was partly catch-up; the retail recovery at Christmas was more hype than reality," Swonk says. "Consumer confidence is still at recession levels, just not at depression levels."

The good news:

Measuring the economy

•The risk of another U.S. recession is falling. The median estimate of USA TODAY's panel call it only a 22% probability in the next 12 months.

•Europe's financial crisis will shave only a quarter of a percentage point from this year's U.S. growth, the economists said.

•More than 90% of the economists think home prices have either already bottomed out or will by the end of this year.

•The Federal Reserve won't raise interest rates until the second half of 2013, half the experts says. Nearly as many say it will be 2014 or later.

The not-so-good news:

•Job growth will slow to a monthly pace of 144,000 new jobs early this year, after an estimated rise of 165,000 a month in the fourth quarter, the panel predicted. In fact, the economy produced an average of 137,000 new jobs a month in the fourth quarter, driven by December's better-than-expected gain of 200,000 new jobs..

•Employment won't return to what's considered a healthy level until 2014 or later, the economists unanimously agreed.

The expected slowing of growth has Wall Street betting that the Federal Reserve will do more to rekindle the economy, possibly as soon as this week's policymaking meeting of the Fed's Open Market Committee Tuesday and Wednesday. It might decide to pump as much as $1 trillion into the economy by buying mortgage-backed bonds from banks and institutions, Miller Tabak & Co. economic strategist Andrew Wilkinson says.

"The Fed is underwhelmed by the recovery," he says. "They see the recovery hampered by the housing market, which is not going away anytime soon, and it's causing employment gains to be lightweight."

On Monday, a new economic forecast predicted that while U.S. economy should make some modest growth strides this year, it likely won't be quite enough to significantly reduce the number of jobless Americans looking for work.

About two-thirds of the economists who participated in the latest National Association for Business Economics survey expect GDP to grow above a 2% annual rate this year, according to the Los Angeles-based group's outlook released Monday.

The latest forecast is in line with one issued by the group in November that called for the economy to grow 2.4% in 2012.

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