Those expecting a rapid economic recovery this year are in for a big letdown, according to an Associated Press survey of 44 prominent economists.
Those anxiously watched indicators of our nation’s economy — home values and the unemployment rate — will stay mostly flat through 2011, the economists said. The AP’s new quarterly Economy Survey included private, corporate and academic economists, the news organization said.
The economists project home values, which have fallen an average of 30 percent from the market’s peak in 2006, will see no gains this year and a 2.3 percent rise next year. Significantly, the economists predicted home values may not start to rise normally (about 4 percent per year since World War II) until the middle of the decade.
They anticipate a new wave of foreclosures will dampen prices until then, even though they expect existing-home sales to rise up to 5.4 million this year and 5.9 million next year, the AP said. Lack of home equity will also tamp down consumer spending, the economists said.
"Our houses are no longer cash machines," Allen Sinai, chief economist at Decision Economics, told the AP.
One economist who took part in the survey, Mark Zandi, chief economist of Moody’s Analytics, reviewed home-price data from 1969 forward and told the AP that, adjusting for inflation, home prices were essentially flat through the 1980s and the first half of the 1990s.
In order to stimulate lending — and home sales in particular — the soonest the Federal Reserve will raise short-term interest rates (near zero now) will be this year’s fourth quarter, 34 of the 44 economists told the AP.
According to the AP’s report, the economists project the economy will grow 3 percent this year, which is less than the 5 percent they say will lower the unemployment rate by 1 percentage point.
Jobs, therefore, will remain elusive — some of the economists expect the unemployment rate to dip slightly to 9.3 percent (it’s 9.7 percent now) by December and drop to 8.4 percent by the end of next year.
Others, Zandi among them, predicted the unemployment rate would rise again to 10.2 percent by the end of the year as those who previously gave up finding a job start to look again.
The economists said that just to keep the unemployment rate from increasing, employers have to create about 125,000 new jobs every month. March saw an addition of 162,000 jobs, according to the AP, and the economists predict this month will see about 200,000 new jobs.
"The labor market is the scar left over from the economic trauma that we’ve been through," Sean Snaith, economics professor at the University of Central Florida, told the AP. "It will be slow to fade."
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