Analysts believe economy poised for strong growth
WASHINGTON -- The U.S. economy, buffeted by everything from recession and terrorist attacks to a collapsing stock market and corporate scandals, is finally poised for stronger growth.
Even jobs, a notable no-show in the recovery so far, will gradually start to improve, a national economists' group predicted Monday.
In its new outlook, the National Association for Business Economics forecast that the gross domestic product, the country's total output of goods and services, would increase at an annual rate of 4.5 percent during the current July-September quarter and would continue growing at a 4 percent pace in the final three months of the year.
The forecast, if it becomes reality, would mark the economy's strongest back-to-back quarterly growth rates since the last half of 1999.
After that, the economy was hit by a series of blows. The stock market bubble burst in the spring of 2000, followed by a recession of March 2001, then the terrorist attacks on Sept. 11, 2001, and later a wave of corporate accounting scandals.
The NABE forecasting group said the wave of job layoffs that continued through last month may finally be coming to an end as growth moves up to levels which will prompt companies to rehire laid-off workers.
"The U.S. economy finally appears to have hoisted its sails," said NABE president-elect Duncan Meldrum.
Meldrum, chief economist at Air Products and Chemicals Inc. of Allentown, Pa., said two-thirds of the NABE's 35-member forecasting panel believe businesses will be adding at least 100,000 workers per month to their payrolls by the end of this year.
That would be quite a turnaround from the current "jobless' recovery. Non-farm business payrolls have fallen for seven consecutive months, bringing job losses just this year to nearly half a million workers.
Such a rebound in new jobs would be welcome news for President Bush. He is being attacked by Democratic presidential candidates who contend his record on jobs is the worst of any president since Herbert Hoover presided at the start of the Great Depression in the 1930s.
However, the NABE forecasters caution that the unemployment rate will be slower to improve because as the economy turns around, disappointed Americans who dropped out of the labor market will resume their job search. Also, the nation's productivity has been growing so strongly that companies will be able to achieve significant output gains without major hiring increases.
The NABE forecasters predicted the unemployment rate will still be around 5.8 percent when voters go to the polls in November 2004 -- a slight improvement from the current 6.1 percent unemployment rate. Unemployment hit a nine-year high of 6.4 percent in June.
The new NABE forecast, presented at the group's annual convention in Atlanta, was significantly stronger from the May outlook. It also was in line with many private forecasters' projections, revised to reflect the boost the economy got from continued low-interest rates by the Federal Reserve and the impact of Bush's third round of tax cuts, which took effect in July.
NABE projected GDP growth of 2.6 percent for all of 2003 followed by 4.3 percent growth in 2004. That would be the best annual showing since GDP grew by 4.1 percent in 1999 during the country's record-long, 10-year expansion.
Forecasters have projected second-half rebounds for three straight years that failed to materialize, but economists said they believe this one is for real -- as long as the country isn't hit with another major shock like the terrorist attacks.
David Wyss, chief economist at Standard & Poor's Co. in New York, said his own forecast was for even stronger GDP growth at a 5.1 percent rate in the current quarter based on a string of more positive economic reports in such areas as factory orders and consumer spending.
The government said Monday that industrial production overall managed to eke out a 0.1 percent gain in August despite the country's massive power outage and weakness in auto output.
"We seem to be bounding up again and as long as something doesn't scare us in the way of terrorism or the Middle East, we should be okay," Wyss said.
Without inflationary pressures, the NABE forecasters said they believed the Fed, which meets again Tuesday, will leave interest rates untouched at a 45-year low of 1 percent for the federal funds rate for an extended period. Half the NABE panel said they did not expect a Fed rate hike until at least the May-July period of next year.