Economists expect the joblessness that has weighed down the nation's economic recovery will start to slowly abate in 2010, but they predict consumers will continue to keep a tight rein on spending, according to a new survey.
While signs have pointed to the end of the recession, joblessness remains rampant. The national unemployment rate jumped to 10.2 percent in October, the highest in 26 years. About 9 million people currently receive unemployment benefits.
The November outlook by the National Association for Business Economics, which is set to be released Monday, shows economists expect net employment losses to bottom out in the first quarter of next year. Employers are seen starting to add to their payrolls after that.
"While the recovery has been jobless so far, that should soon change," said Lynn Reaser, NABE's president and chief economist at Point Loma Nazarene University. "Within the next few months, companies should be adding instead of cutting jobs."
But even if companies do start restaffing next spring, they aren't expected to ramp up hiring very quickly. Some 7.3 million jobs have been lost since December 2007, according to NABE.
Of the 48 panelists surveyed, 61 percent do not expect a complete recovery of those lost jobs until 2012. And they expect the unemployment rate will remain "stubbornly high," averaging 9.6 percent in the fourth quarter of 2010.
Panelists ranked high unemployment as their second biggest concern over the next five years, expressing "extreme concern" first and foremost about the federal deficit.
Those surveyed expect inflation will remain low and the dollar to remain weak, though they see it strengthening against the euro and continuing to be a major reserve currency.
The economy grew at a 3.5 percent pace in the third quarter, the Commerce Department announced last month, a strong signal that the economy is entering a recovery phase from the worst recession since the Great Depression. But the pace of the recovery is expected to be slow because of high unemployment and tight credit.
The latest survey by NABE notes that sluggish consumer spending will continue to weigh on the economy. But it predicts rebounds in housing, growth from business spending as more companies restock lean inventories, and a rise in stock prices.
Economists polled in the survey predict 3 percent real GDP growth in the 2009 fourth quarter, and 3.2 percent growth for all of 2010. For the two years combined, the projected growth is half a percentage point higher than the forecast NABE gave in October.
"Real GDP growth should also be enough to recover losses from the recession and return output to an all-time high by the end of 2010," NABE forecasters predict.
Those surveyed say the housing recovery will gather momentum, helped by low interest rates, with housing starts expected to jump 36 percent and residential investment climbing 9 percent next year.
Such results would make 2010 the first year since 2005 that the housing sector contributes to overall growth. Economists expect home prices to gain 2 percent next year, after bottoming out in 2009.
Consumer spending gains are expected to be "lackluster," as workers continue to worry about jobs and investments. Panelists also expect to see a "persistently elevated sense of thrift" as consumers save more. They expect the personal savings rate to average 4 percent in 2010, the highest level since 1998.
Businesses, though, will increase their spending. The survey said the inventory liquidation of the past year will bottom out and companies will restock in 2010, while also spending more on equipment and software because of higher profits.
Corporate profits are expected to gain 12.4 percent in 2010, which the survey said was average for the first year of an economic recovery. All survey respondents expect the stock market to grow in 2010, with the S&P 500 Index seen rising 9.5 percent next year.
The NABE survey of 48 professional forecasters was taken Oct. 24-Nov. 5.