A snapshot of the AP Economy Survey results

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Posted: Apr 26, 2011 4:55 PM
A snapshot of the AP Economy Survey results

The quarterly AP Economy Survey drew upon forecasts from 42 economists. Here are their average predictions:

ECONOMIC GROWTH:

_The economy will grow 2.9 percent this year, the same as last year. That's a bit weaker than the 3.2 percent growth that was forecast in January. It was marked down because the economy got off to a disappointing start this year. Growth slowed to a 2.2 percent annual rate in the January-March quarter as bad weather and high oil prices restrained spending. Growth, however, should improve the rest of the year. Economists predict growth will increase to a 3.2 percent rate in the April-June quarter, a 3.4 percent pace in the July-September quarter and a 3.5 percent pace in the October-December quarter.

JOBS:

_ Unemployment rate: The rate fell to 8.8 percent in March and has dropped a full percentage point from November. Economists expect unemployment to hold steady in April and May and then dip to 8.7 percent in June. By December, the rate will fall to 8.4 percent. That's a brighter outlook than three months ago, when the economists predicted the rate would be 8.9 percent at year's end.

_ Net job creation: Employers will add 2.1 million jobs this year, compared with 940,000 added last year.

RECOVERING LOST JOBS:

_ The Great Recession wiped out 7.5 million jobs. About 40 percent of the economists predict all the jobs will return within five years. But the remaining 60 percent think only around 6 million of those jobs will return by then. Asked why some of the lost jobs may not come back, many economists cited some industries that are permanently downsizing. Others mentioned companies learning how to produce more with fewer workers.

CONSUMER SPENDING:

_ Consumer spending is projected to grow 2.8 percent this year, compared with an anemic 1.7 percent last year. Stronger spending this year will help the economy grow and should encourage companies to hire more. Even with the expectation that consumers will spend more, they show no signs of spending as lavishly as they typically do after deep recessions. By contrast, consumer spending exceeded 5 percent in 1983, 1985 and 1985, when the economy was recovering from a severe downturn.

WAGES:

_ A majority of economists think wages will consistently exceed inflation beginning next year at the latest. Inflation-adjusted hourly wages fell 0.4 percent in the 12 months that ended in February.

INFLATION:

_ Inflation will rise to 2.8 percent this year. That's up from a 1.5 percent increase last year. But inflation would still be lower than the 3.2 percent inflation rate averaged over the last 30 years. Most of the projected increase is due to more expensive food and energy prices.

Excluding volatile food and energy prices, "core" inflation is projected to rise 1.7 percent this year, compared with 0.8 percent last year, the smallest increase on records stretching back to 1958. Even with the projected pickup, underlying inflation would still be within the range the Fed thinks a healthy economy needs.

FEDERAL RESERVE:

_ Around 47 percent of the economists think the Fed will start signaling a move toward higher interest rates this year to fend off inflation. But 50 percent predicted that wouldn't happen until the first quarter of 2012 or later.

TREASURY RATES:

_ Economists predict the yield on the 10-year Treasury note will rise to 3.67 percent by early July. The rate is 3.36 percent now. By January next year, the rate will climb to 4.03 percent. Mortgage rates tend to track the yield on the 10-year Treasury note. So do other consumer and business loans.

OIL:

_ Roughly three-fourths of the economists said oil would have to rise to $150 a barrel or more to make another recession a real possibility.

RISKS:

_ Most economists characterized falling home prices, Middle East turmoil, a post-disaster slowdown in Japan and a slowdown in China as posing only "minor" risks to the U.S. economy. Economists were divided over how much risk higher oil prices pose.