According to Bloomberg BNA’s annual Economic Outlook released today, major shifts in federal fiscal policy will bring about continued uncertainty and a temporary slowdown in U.S. economic growth in the first half of 2013. However a strengthening private sector is expected to boost growth in the second half of the year.
The consensus forecast of economists at 21 leading financial, consulting, and academic organizations across the United States also calls for the unemployment rate to continue on a gradual downward slope from its recent four-year low of 7.8 percent to an average of 7.5 percent in the second half of 2013.
Following is a summary of the 2013 forecast:
U.S. Economy
- Economy will slow in early 2013 from impacts of the payroll tax hike and constraints on federal spending, but growth will improve in second half of the year as the private sector strengthens.
- Key drivers of growth will be business investment and job creation, the housing industry recovery, and consumer spending.
- Major risks to the economy would loom if President Obama and Congress are unable to agree on a plan to raise the debt ceiling and curb growth in the long-term deficit.
Labor Markets
- Job growth gains will be modest in the first six months of 2013, accelerating to 176,000 jobs per month in the second half of the year.
- Unemployment rate will continue on a gradual downward slope, from 7.8 percent at the end of 2012 to 7.5 percent on average in the second half of 2013.
- Private sector workers’ total hourly compensation will grow 2.6 percent in 2013, up from a 2.0 percent gain in 2012, as of the third quarter.
Monetary Policy
- Federal Reserve will maintain its historically low, near-zero federal funds rate target through at least the end of 2013.
- Central bank likely will continue its program of ongoing bond purchases, known as quantitative easing, into 2014.
- Inflation is expected to stay tame, at close to the Fed’s preferred rate of about 2 percent.
World Economy
- Euro zone’s risk of an escalating crisis has diminished, and recession is expected to end during the course of 2013 as economic growth resumes.
- Globally, downside and upside risks are more balanced than a year ago, and stronger-than-expected growth is possible, notably in the U.S. housing and labor markets.
- Growth in trade volume, which began picking up in the fourth quarter of 2012, will gain further momentum in 2013, led by developing countries.
Source: Bloomberg BNA