The nation’s economy and job-creating engine will start to purr later this year as business activity picks up — more than offsetting federal government cutbacks, predict economists surveyed by USA Today.
After starting the year slowly, the economy will shift into a higher gear this summer and then grow for the next nine months at the fastest pace in three years, according to the median estimates of 46 economists.
“I think we’re really on the verge of this becoming a self-sustaining recovery,” said Richard Moody, chief economist at Regions Bank.
The economists expect average monthly job gains of 171,000, with the pace quickening late this year. They expect unemployment to fall from 7.9% to 7.5% by year’s end. In October, economists surveyed predicted average monthly gains of 155,000 jobs.
Several said they raised their forecasts in part after the government this month revised up its estimate of average monthly job growth from 153,000 each of the past two years to 175,000 in 2011 and 181,000 in 2012.
The revisions reflect a job market that’s expanding more rapidly than previously believed, Moody said.
The first half of 2013 is expected to be sluggish as government spending cuts dampen growth and a payroll tax increase crimps consumer spending. Those surveyed expect the economy to grow at less than a 2% annual rate the first six months of 2013.
But Congress and the White House averted a worse fate by agreeing in January to keep income taxes stable for households earning less than $450,000 a year. Thirty-seven percent of the economists are more optimistic about this year’s outlook than they were three months ago.
What’s more, the economists expect the effects of the federal cuts to fade by the fourth quarter, with growth picking up to a 2.7% pace. They said the housing market is rebounding, a rising stock market is boosting consumer wealth, the European financial crisis is easing and corporate America is cash-rich.
Economists are increasingly, but still cautiously, optimistic about growth in the year ahead with hiring expected to pick up in coming months.
According to an Associated Press report, a quarterly survey by the National Association for Business Economics released Monday (Jan. 28) shows half of the economists polled now expect real gross domestic product — the value of all goods and services produced in the United States — to grow between 2% and 4% in 2013. That’s up from 36% of respondents who felt the same way three months earlier.
About half expect sluggish or negative performance, down from 65% in October.
The latest survey was conducted between Dec. 20 and Jan. 8 and asked 65 economists and others who use economics in the workplace about conditions at their firms or industries. It found that 34% of firms now expect to expand their payrolls in the next six months, the highest percentage since April of last year. Meanwhile, 2% said they expect their companies to cut payrolls through layoffs, while 14 percent see payrolls trimmed through attrition.
A quarter of respondents also said employment grew at their firms in the fourth quarter, which is comparable to the levels seen in the first half of 2012. The same percentage also reported a rise in wages at their firms in the final three months of the year, up 10 percentage points from the last survey.
Overall sales growth was stable in the fourth quarter with results mixed across industries. For instance, growth slowed in the services, finance, insurance and real estate sectors, but rose in the transportation, utilities, information and communications sectors.
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A measure of the U.S. economy designed to signal future activity increased in December from November, suggesting growth may strengthen in 2013.
The Conference Board said Thursday (Jan. 24) that its index of leading indicators rose 0.5% in December, the best showing since September. In November, the index was unchanged. The gauge is designed to anticipate economic conditions three to six months out.
A decline in applications for unemployment benefits, gains on Wall Street and increases in applications for building permits drove the index higher in December.
Conference Board economist Kenneth Goldstein said the rebound in the leading index suggested an improving outlook in contrast to a few months ago when the expectations were not so optimistic.
“Housing, which has long been a drag, has turned into a positive for growth, and will help improve consumer balance sheets and strengthen consumption,” Goldstein said. “However, for growth to gain more traction we also need to see better performance on new orders and an acceleration in capital spending.”
Five of the 10 indicators that make up the index were positive factors in December. Consumers’ dim outlook for business conditions and weaker expectations for manufacturing orders held back the index.
The index is derived from data that for the most part have already been reported individually.
The U.S. economy is expected to grow by 2.5% in 2013, improving to 3.5% growth in 2014, top Fed official Charles Evans said on Monday (Jan. 14).
According to Reuters, Evans also forecast the U.S. unemployment rate would be 7.4% this year, easing to about 7% in 2014.
“One good indicator of labor market improvement would be if we saw payroll employment increase by 200,000 each month for a number of months. We’ve been averaging about 150,000, but it’s been very uneven … we need a higher pace of employment growth and less volatility in that pace,” Chicago Fed President Evans said.
The creation of 1 million jobs over six months would be a “substantive” improvement, but bringing unemployment down to the key level of 6.5% was likely to take much longer, probably until mid-2015, he said, speaking at the Asian Financial Forum in Hong Kong.
The U.S. Federal Reserve’s decision last year to tie monetary policy to specific economic conditions should help boost the recovery without letting inflation take hold, said Evans, a chief architect of the policy.
It also provides additional accommodation by assuring markets that rates will remain low even after the economy perks up, he said.
“Given more explicit conditionality, markets can be more confident that we will provide the monetary accommodation necessary to close the large resource gaps that currently exist,” he said. “Additionally, the public can be more certain that we will not wait too long to tighten if inflation were to become a substantial concern.”
Last month, the Fed ramped up asset purchases aimed at spurring growth, and pledged to keep rates near zero until the unemployment rate drops to 6.5%, as long as inflation expectations do not climb above 2.5%.
Evans, who rotates into a voting spot on the Fed’s policy-setting panel this year, had been pushing for exactly such a threshold-based policy for more than a year, saying the Fed needed to take a much more activist role in trying to meet its mandate to boost employment.
The U.S. will become the world’s top producer of oil within five years, a net exporter of the fuel around 2030 and nearly self-sufficient in energy by 2035, according to a new report from the International Energy Agency.
It’s a bold set of predictions for a nation that currently imports some 20% of its energy needs, according to a report by the Los Angeles Times.
Recently, however, an “energy renaissance” in the U.S. has caused a boost in oil, shale gas and bio-energy production due to new technologies such as hydraulic fracturing, or fracking. Fuel efficiency has improved in the transportation sector. The clean energy industry has seen an influx of solar and wind efforts.
By 2015, U.S. oil production is expected to rise to 10 million barrels per day (bpd) before increasing to 11.1 million bpd by 2020, overtaking second-place Russia and front-runner Saudi Arabia. The U.S. will export more oil than it brings into the country in 2030.
Around the same time, however, Saudi Arabia will be producing some 11.4 million bpd of oil, outpacing the 10.2 million from the U.S. In 2035, U.S. production will slip to 9.2 million bpd, far behind the Middle Eastern nation’s 12.3 million bpd. Iraq will exceed Russia to become the world’s second largest oil exporter.
At that point, real oil prices will reach $125 a barrel. By then, however, the U.S. won’t be relying much on foreign energy, according to the IEA’s World Energy Outlook.
Globally, the energy economy will undergo a “sea change,” according to the report, with nearly 90% of Middle Eastern oil exports redirecting toward Asia.
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The U.S. created a better-than-expected 171,000 jobs in October and hiring rose faster in the prior two months than previously believed, but the politically sensitive unemployment rate edged up slightly to 7.9%, the government said Friday.
CBS MarketWatch reported that the October employment report, which came out just four days before the presidential election, is unlikely to change the trajectory of the race. Republicans will point to the rise in unemployment while Democrats can cite stronger job gains in the past four months.
Yet the improvement in hiring is a welcome sign to Wall Street that the U.S. economy is still continuing to expand at a moderate pace of around 2% or so.
The increase in net hiring last month exceeded market expectations. Economists surveyed by MarketWatch had forecast a net increase of 120,000 jobs in October, based on the Labor Department’s survey of roughly 440,000 business establishments. The survey was conducted before Sandy and the storm did not affect the numbers.
The unemployment rate, drawn from a separate survey of about 60,000 households, was expected to edge up to 7.9% from 7.8%. The household survey is viewed as a less reliable indicator of near-term hiring trends than the so-called establishment report, however.
Consumer spending in the U.S. climbed more than forecast in September, a sign the biggest part of the economy was picking up as the quarter drew to a close.
Bloomberg reported that household purchases, which account for about 70% of gross domestic product, rose 0.8%, the most since February, after advancing 0.5% in August, a Commerce Department report showed today (Oct. 29) in Washington. Incomes climbed 0.4%, the most since March.
The acceleration in spending may help the world’s largest economy overcome a slowdown in exports and business investment as global growth slackens and concern mounts about the so-called fiscal cliff. At the same time, a drop in saving to finance purchases indicates bigger gains in employment are required to provide the income needed to sustain spending.
“The strength in September gives consumer spending a good lift for the fourth quarter,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn. “The housing market seems to have turned. Consumers are clearly feeling better and are going out and spending a bit more.”
Equity markets in the U.S. were closed today as Hurricane Sandy barreled toward New York City. Risks posed by the storm, expected to come ashore late today in southern New Jersey and potentially affect 60 million people, were deemed too great to require workers to travel.
U.S. retail sales rose in September as Americans bought more cars and gasoline, while a gauge of consumer spending pointed to stronger-than-expected economic growth in the third quarter.
Reuters reported that retail sales increased 1.1%, the Commerce Department said on Monday (Oct. 15), beating expectations after an upwardly revised 1.2% rise in August.
Retail sales outside of autos, gasoline and building materials — a barometer of consumer spending known as core retail sales — rose 0.9% last month.
That was well above the 0.3% gain expected by analysts in a Reuters poll, and suggests consumers did more to drive economic growth in the July-September period than economists had expected.
Consumer spending drives about two-thirds of the U.S. economy.
Sluggish demand and a punishing drought restricted the economy to a 1.3 percent annual growth pace in the April-June period. Before the retail sales report was released, economists were expecting growth to accelerate to a 1.6% pace in the third quarter, according to a Reuters poll.
The details of the report showed broad strength across retailers, with sales of motor vehicles and parts up 1.3%. Receipts at gasoline stations rose 2.5%, reflecting an increase in prices paid at the pump.
Other categories were also strong, with sales at electronics retailers up 4.5%, while sales at food and beverage stores rose 1.2%.
The Federal Reserve said today that the U.S. economy was expanding “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change.
“Consumer spending was generally reported to be flat to up slightly since the last report,” the Fed said in its Beige Book business survey, which is based on accounts from the 12 district Fed banks. Conditions in manufacturing were “somewhat improved,” according to the report, which provides anecdotal evidence on the health of the economy two weeks before the Federal Open Market Committee meets in Washington on Oct. 23-24.
Bloomberg reported that the Beige Book provides support for Fed Chairman Ben S. Bernanke’s view that economic growth isn’t strong enough to bring about a quick healing of the labor market. A Labor Department report last week showed that while the unemployment rate unexpectedly declined in September, payroll growth slowed.
The Fed on Sept. 13 announced a third round of quantitative easing, with purchases of $40 billion a month of mortgage debt, and said its benchmark interest rate was likely to stay low through the middle of 2015.
The report’s description of the economy is not as positive as Beige Books earlier in the year, which used the word “moderate” to describe the pace of expansion, said Dana Saporta, U.S. economist at Credit Suisse Group AG in New York. “In Fed parlance, modest is a step down from moderate,” she said.
Confidence among U.S. consumers fell in August by the most in 10 months as households grew more pessimistic about their employment prospects and the economic outlook.
Bloomberg reported that the Conference Board’s index decreased to 60.6 from a revised 65.4 in July, figures from the New York-based private research group showed today. The 4.8-point decrease was the biggest since October. The reading was less than the most- pessimistic forecast in a Bloomberg survey in which the median projection was 66.
Rising gasoline prices, a jobless rate that’s been above 8% since the start of 2009 and limited income gains are keeping consumers glum. Persistent pessimism raises the risk of a pullback in household purchases that account for about 70% of the world’s biggest economy.
“The consumer is still very cautious,” said Jim O’Sullivan, chief U.S. economist for High Frequency Economics Ltd. in Valhalla, New York, who projected a drop in sentiment. “The labor market is still relatively weak. There’s a lot of uncertainty about policy ahead of the election” and fuel costs have accelerated, he said.
This month’s confidence reading was the lowest since November. Estimates for the Conference Board gauge ranged from 61 to 68 in the Bloomberg survey of 77 economists. The measure averaged 53.7 during the 18-month recession that ended in June 2009.