Tags: Economists | growth | Forecasts | jobs

Fed Forecasters Cut Growth Targets as High Unemployment to Linger

Friday, 10 August 2012 11:25 AM

Forecasters dialed back their expectations for economic growth as the unemployment rate was seen remaining high for the rest of the year, a survey released on Friday showed.

The Philadelphia Federal Reserve's third-quarter survey of 48 forecasters showed economists expect gross domestic product to grow at an annual rate of 1.6 percent this quarter, down from May's estimate of 2.5 percent.

Expectations for the year were also trimmed, with the economy seen growing at a 2.2 percent pace in 2012, down from the previous 2.3 percent.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

Analysts also raised the odds that the economy could contract in any of the next four quarters. For the third-quarter, the odds were lifted to 13.8 percent from May's 12.2 percent.

The labor market was seen faring worse. The unemployment rate is projected to be 8.2 percent in 2012, before falling to 7.9 percent in 2013, 7.3 percent in 2014, and 7.0 percent in 2015, the Philadelphia Fed said.

Nonfarm payrolls were seen growing at a rate of 125,000 jobs a month in the third quarter, down from the 170,000 economists predicted in the previous survey.

Inflation expectations also cooled. Consumer prices in the third quarter were seen averaging 1.5 percent, down from earlier estimates of 2.3 percent.

But core inflation, which strips out volatile items such as food and gasoline, was expected to average 2.2 percent, up from the previous 2.0 percent estimate.

Fed Chairman Ben Bernanke said in a speech to teachers this week that “our economy is still in a fragile recovery” and the central bank is working to restore normal levels of employment and growth.

The Federal Open Market Committee said Aug. 1 that it will provide “additional accommodation” as needed to promote an improved job market.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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Friday, 10 August 2012 11:25 AM
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