A poll of economists has been released, and it isn't very encouraging.
Unemployment will average 8.5 percent in 2011 after a 9.6 percent rate next year, higher than previously expected, according to the median forecast in the survey taken from May 4 to May 11. The economy may expand 2.8 percent in 2011, less than estimated last month, after a 1.9 percent rise in 2010.
“The worse the labor market is and the longer that lasts, the more difficult it’ll be for consumers to recover,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The economy isn’t going to come roaring out of the box here.”
The economy will contract at a 1.9 percent pace this quarter, returning to a growth rate of 0.5 percent in the July to September period and 1.8 percent in the final three months, according to the median forecast of 61 economists surveyed.
President Barack Obama’s $787 billion stimulus plan, which includes tax cuts, infrastructure spending and a goal to create or save 3.5 million jobs, will drain the budget, the survey showed. The federal deficit may jump to 12.2 percent of GDP this year, more than prior estimates. Forecasts for 2010 and 2011 also exceeded last year’s 5.8 percent share.
“The credit market would not take kindly to a further expansion of the budget deficit and it could run the risk of backfiring,” said John Lonski, chief economist at Moody’s Capital Markets Group in New York. Foreign investors don’t like large deficits and an additional increase would shut off the flow of funds into the U.S., he said, pushing up bond yields “and sending the dollar into a tailspin.”
I find this particularly discouraging because economists are generally more optimistic than economic realities. For instance, they rarely anticipate recessions, and are always on the look-out for reasons to declare a recession over.