Economists: U.S. growth to pick up speed in 2014

Dec. 9, 2013 at 12:01 AM
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WASHINGTON, Dec. 9 (UPI) -- U.S. economic growth will speed up into next year, with the jobless rate averaging the current 7 percent, a business economists survey released Monday showed.

The economy will likely grow at an annualized, inflation-adjusted pace of 2.8 percent in 2014 and reach 3 percent in the fourth quarter, the National Association for Business Economics' December Outlook Survey indicated.

The 2.8 percent annualized rate represents a median figure from economists whose forecasts range from 1.9 percent to 4 percent, NABE said.

The NABE survey was conducted Nov. 8-19, more than two weeks before the U.S. Commerce Department estimated Thursday the economy grew at an annual 3.6 percent rate in the third quarter instead of the 2.8 percent pace it originally reported.

The department is to release a final revision Dec. 20.

The revised third-quarter pace was the most robust since the first quarter of 2012 and marked an acceleration from the April-June period's 2.5 percent rate.

But many economists generally said the better-than-expected data, stoked by rising inventories, would likely be counterbalanced by a decrease in economic growth in the current quarter as businesses work off excess stock on their shelves and in warehouses.

"The strong third quarter doesn't make a trend," Federal Reserve Bank of Atlanta President Dennis Lockhart said Thursday.

"I am not prepared to interpret the revised third-quarter number as an indication that the economy is on a much stronger track -- I think we're still on that relatively moderate growth track," he said.

Barclays Capital Securities followed the surprise Commerce Department report with a statement downgrading its fourth-quarter real economic growth forecast to a 1.5 percent annual rate from 2 percent.

On other economic indicators, the NABE survey respondents said the unemployment rate -- which fell to a five-year low of 7 percent in November, the lowest reading since President Obama took office -- would likely average the same 7 percent next year.

The rate was 7.3 percent in October, the same as it was in December 2008, the month before Obama was first inaugurated.

Non-farm payrolls are expected to increase 197,000 a month, up from this year's average monthly gain of 177,500, the survey indicated.

Non-farm payrolls refers to paid U.S. workers of all businesses except government, non-profit, private households and farms.

In the latest official figures, employers hired 203,000 non-farm workers in November, the Labor Department said Friday. By contrast, employers created only 89,000 new jobs as recently as July.

Affordable Care Act provisions are expected to trim 10,000 jobs from monthly payroll growth in 2014, the economists forecast.

Hourly pay will likely increase 2.4 percent next year as the labor market tightens, the panelists said.

The prospect of higher employment and faster economic growth increases the likelihood the Federal Reserve will soon start easing back on its bond-buying economic-stimulus efforts, many economists say.

Fed Chairman Ben Bernanke predicted in June the Fed would taper its purchases by the end of this year, and officials say the Fed still could announce such a cut next week, when its policymaking committee holds its last meeting of the year.

But most NABE survey panelists said they believed the Fed would hold tight and not rein in its stimulus bond-buying, known as quantitative easing, until the first half of 2014.

Sixty-two percent of respondents said they expected the tapering would begin in the first three months and 30 percent said they believed it would start in the second quarter.

Eighty-eight percent of panelists said they believed new across-the-board federal budget cuts, known as budget sequestration, would take effect next year, but 76 percent said they expected the cuts would slow real economic growth by less than 0.5 percentage points.

While the fiscal restraint may temper growth, it will help shrink the budget deficit, the panelists said.

They forecast the federal deficit would be $600 billion in current 2014 fiscal year, ending Sept. 30, down from $680 billion in 2013 and $1.09 trillion in 2012.

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