Tags: Economists | Sluggish | Recovery | us

CNNMoney Poll: Economists Fear Sluggish Recovery Here to Stay

By    |   Thursday, 19 April 2012 10:39 AM

The economic recovery will remain sluggish, with the unemployment rate falling only slightly by the end of the year, say economists participating in a CNNMoney survey.

The economists believe unemployment will drop to 8 percent by the end of the year, only a small improvement from the current 8.2 percent rate.

The unemployment rate falls when unemployed people stop looking for work, then rises when signs of economic improvement prompt people to re-enter the job market.

It's like "running in place," said Lynn Reaser, chief economist at Point Loma Nazarene University, according to CNNMoney.

U.S. GDP grew just 2.4 percent in the first quarter, compared to 3 percent at the end of 2011. Economists predict the economy will grow just 2.6 percent this year.

"Growth prospects should continue to improve in a 'two-steps forward, one step back' type of fashion over the intermediate-term," said Russell Price, senior economist for Ameriprise Financial, according to CNNMoney.

The economy faces significant threats, including recession in Europe and stock market volatility. Plus, the country faces a "fiscal cliff" in 2013, the economists say. At the end of next year, the pay roll tax cut and the Bush tax cuts are scheduled to expire, and massive spending cuts are set to take place.

Although economists have proposed solutions, such as tax reforms, they don't expect Congress to do anything before elections this year.

Researchers at Fannie Mae also expect a slow economic recovery. The company predicts that growth will slow to little more than 2 percent in the first quarter, due to a fading inventory boost to GDP growth.

Slow growth in disposable income, a very small contribution from net exports, continued contraction federal government spending, and ongoing cutbacks by state and local governments will all constrain the recovery this year, predicts Fannie Mae Chief Economist Doug Duncan.

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