Recovery Bummer devolves into Floundering Fall

Posted on October 12, 2010

Don’t think things can get much worse?  I wouldn’t bet on it.

From the Los Angeles Times:

A forecasting panel for the National Assn. for Business Economics on Monday cut its growth estimates for the U.S. economy in 2010 and 2011, conceding that it hadn’t anticipated the extent of the slowdown that hit in spring and continued in summer.

The panel of 46 of the group’s 2,300 members predicted that the economy would grow at a real (after-inflation) rate of 2.6% this year and the same rate next year, down from a May forecast of 3.2% for both years.

U.S. gross domestic product growth slowed to an annualized pace of just 1.7% in the second quarter, down from 3.7% in the first quarter and 5% in the fourth quarter of last year. Many analysts believe that growth in the quarter ended Sept. 30 was between 1.5% and 2.0% — better than a recession, but obviously far too slow to foster meaningful job creation.

Consumer spending — the main driver of U.S. growth — will “remain modest throughout the forecast horizon due to weak job gains, persistently high unemployment, and negligible growth in household net worth reflecting only small gains in the stock market and home prices,” the NABE said.

It predicted holiday retail sales this year would be “especially weak,” rising 2.5% from last year.

But hey, that’s the good news!  The bad news is that this forecast has the rosiest of outlooks compared to others:

The NABE forecasters still are more optimistic about 2011 than the International Monetary Fund, which last week cut its U.S. growth forecast for next year to 2.3% from 2.9%.

And the NABE and IMF both are relatively upbeat compared with Goldman Sachs & Co. economists, who expect U.S. growth to be just 1.8% in 2011.

The consensus among economists: more quantitative easing is on the way. 

Oh, and don’t forget: thanks to Congress abandoning ship in order to return home to campaign, those Bush tax cuts still haven’t been extended.  Because of that your paycheck starting next year will inevitably be a bit smaller.

Posted in: Economy