“The performance of the U.S. economy during much of 2011 did nothing to alter the perception that we were mired in a sluggish recovery,” said economist Joan Crary. “Indeed, by late summer economists were considering the likelihood of a double-dip recession.
“The economy regained some momentum during the fall, however, with the closing quarter registering some of the best economic readings of the year. Although the economy is growing at a subpar rate to begin 2012, we expect the pace of economic activity to accelerate over the next two years as the economic headwinds that have plagued the recovery begin to abate.”
In their annual spring forecast update on the U.S. economy, Crary and colleagues Daniil Manaenkov and Matthew Hall forecast that employment will rise at a moderate pace, consumer spending will increase, the housing market will pick up, and inflation will remain in check in 2012 and 2013.
They predict that payroll employment will rise by 2.5 million jobs during 2012 and 2.3 million during 2013, an average of 200,000 jobs per month.
Unemployment is expected to edge downward from the current rate of 8.3 percent to about 8 percent by the end of 2012 and to 7.7 percent a year later.
Crary and colleagues project economic output growth (as measured by real gross domestic product) of 2.3 percent during this year and 2.6 percent during 2013 — up from 1.6 percent last year.
They note that real nonresidential fixed investment was a major driver of growth in 2011 and continues to be over the forecast horizon, rising by $113 billion in 2012 and $116 billion in 2013.
“Investment is continuing to lead the country out of the recession as consumption growth remains sluggish and government purchases continue to be a drag on the economy,” Crary said. “Investment in nonresidential construction turned around in 2011. It then accelerates in 2012 and 2013, offsetting slower growth in the equipment and software sector, which remains strong but grows at a more sustainable pace.”
The University of Michigan economists also said that residential building is beginning to show signs of life. Single-family housing starts — at an all-time low of 430,000 units last year — will increase by about 100,000 units this year and then reach about 730,000 units in 2013.
Publication date: 04/02/2012