Recession's End Close but Recovery Slow to Gather Strength, BNA Survey Finds

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BNA's mid-year survey of 23 well-known economists found that the consensus predicts the economy will contract 2.6 percent this year and will expand 2 percent next year. That would match the growth pace of 2007 but is well short of the 3.1 percent the world's largest economy averaged in 1995-2004, according to the International Monetary Fund.

All but three of the BNA panelists expect real GDP to turn positive in the summer and only one sees the decline continuing into the fourth quarter. But growth of 2 percent in 2010 is not brisk enough to keep the unemployment rate from rising further: it is forecast to average 9.9 percent next year. It was at 9.4 percent in May.

Survey panelists predict a sluggish recovery, in which:

    --  The recession will end this summer, but most consumers won't
        recognize it as a recovery until the middle or latter part of 2010.
    --  Federal Reserve policymakers will keep monetary policy on hold this
        year. That will change in 2010 as the central bank acts to remove some
        easing, though not very aggressively, since inflation is expected to
        remain low. The consensus predicts the federal funds rate will reach 1
        percent by the end of next year.
    --  Long-term interest rates as measured by the yield of the 10-year
        Treasury bond will rise to 4.33 percent by the end of 2010 from an
        average 3.82 percent at the end of this year. It is around 3.5 percent
        now.
    --  Credit conditions improve and the $787 billion fiscal stimulus package
        bolsters spending and mitigates state and local government cutbacks.
    --  The glut of housing inventory weighing on the economy is beginning to
        correct as businesses which did not anticipate the absolute collapse of
        sales activity late last year realign inventories appropriately.
    --  The Obama administration's stimulus package will help support the
        recovery, though economists vary on how much weight to give it,
        particularly in the first year. Consensus is that, mostly by increasing
        business confidence, it will return the economy to full employment
        faster than would have been the case without it.
    --  GDP will start expanding again this year but growth will be uneven as
        many areas -- like construction -- continue to shed jobs. Construction
        job losses will be mitigated somewhat by home building and
        stimulus-funded projects, but not enough to offset significant decline
        in nonresidential construction.
    --  A total of about 6 million payroll jobs have been lost, or 4.3 percent
        of employment since the recession began in December 2007. Panelists
        expect total losses to reach 7.6 million jobs by the time employment
        hits bottom in the first half of 2010, although the pace of the decline
        will decelerate steadily.

    --  In the first half of 2010, payrolls will grow on average 51,000 a month.

BNA (www.bna.com) is the leading independent publisher of print and electronic news, analysis, and reference products for professionals. Delivering specialized information to business, legal, and government professionals at every level of expertise, BNA produces more than 300 news and information services, including the highly respected Daily Labor Report, U.S. Law Week, and Daily Report for Executives.

SOURCE BNA

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