Modest Growth Seen in 2012, as Economy Tries to Build Momentum

The U.S. economy will improve in 2012 but remain sluggish, weighed down by slow job creation, weaker global economic growth, and lingering fallout from the recession, according to BNA's annual Economic Outlook released today.

The consensus forecast of the 26 economists at 21 leading financial, consulting, and academic organizations across the United States also calls for the unemployment rate to rise from its recent low of 8.6 percent but remain under 9.0 percent, as more Americans start looking for work. In addition, interest rates will stay low, and inflation will ease, but wage gains will remain small. Following is a summary of the 2012 forecast:

U.S. Economy

• The pace of growth will pick up slightly in 2012, assuming the payroll tax cut is extended for a full year, but remain slow compared with most expansions.
• Key factors underpinning continuation of the two-and-a-half-year-old recovery include job creation and investment by businesses and growth in consumer spending and U.S. exports.
• Major risks to the U.S. economy include European sovereign debt crisis, high unemployment, government cutbacks, and business uncertainty.

Labor Markets

• Employment gains will average 110,000 jobs per month in the first six months of 2012, accelerating to 126,000 jobs per month in the second half.
• Unemployment rate will average 8.8 percent during the year, up from 8.6 percent in November 2011.
• Private sector workers' total hourly compensation will grow 2.4 percent in 2012, up from 2.1 percent growth in 2011, as of the third quarter.

Monetary Policy

• Fed's pledge to maintain key interest rate target near zero through 2012 and the first half of 2013 could be extended.
• Inflation should ease enough to give Fed flexibility to remain accommodative.
• Additional Fed asset purchases could be in the offing, particularly if Europe's debt troubles worsen.

World Economy

• Europe is the single biggest risk to 2012 world outlook if what is now seen as a mild recession there worsens.
• The second biggest risk to global outlook is a too-marked slowdown in China's pace of growth in the coming year.
• Better-than-expected U.S. growth could boost global output, but political impasses add to uncertainty.

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