Economic outlook in US grows dimmer
Source: Agencies |
June 6, 2012, Wednesday
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Print Edition
Print Edition
THE faltering US job market has prompted economists to take a much dimmer view of the country's growth prospects. That's a shift from just a few weeks ago, when many were upgrading their forecasts.
Friday's surprisingly bleak jobs report for May followed a spate of disappointing data. Manufacturing activity slowed, an index of home sales fell and consumer confidence tumbled. Mounting troubles in Europe and elsewhere have heightened economists' concerns.
"The latest economic data have been decisively disappointing," Michael Feroli, an economist at JPMorgan Chase, wrote in a client note.
JPMorgan Chase sharply reduced its growth forecast for the July-September quarter to a 2 percent annual rate, down from 3 percent. It cited the weaker US hiring and a likely drop in US exports due to slower growth overseas. It forecasts growth of 2.1 percent for 2012, down from 2.3 percent.
Julia Coronado, an economist at BNP Paribas in New York, said she now expects growth of 2.2 percent this year, down from her previous forecast of 2.4 percent. She also revised downward her estimate of growth in the April-June quarter to 2.2 percent.
"We keep hoping that we're going to turn a corner and move into a stronger phase of recovery, and the door keeps getting slammed shut," Coronado said.
Forecasting firm Macroeconomic Advisers and Swiss bank UBS have also marked down their expectations since Friday's jobs report.
It normally takes about 2.5 percent growth to generate enough hiring just to keep up with population growth.
After months of fitful expansion since the recession ended three years ago, many analysts had expected the economy to begin strengthening.
Last month, the National Association for Business Economics said its latest survey of economists found rising expectations for job gains and housing construction. And in April, the Federal Reserve raised its forecast for growth this year to nearly 2.7 percent, from a January estimate of 2.5 percent.
Now, it looks as if the recovery is stumbling again. The big blow was Friday's jobs report. It said employers added only 69,000 jobs in May, the fewest in a year, and that fewer jobs were added in the previous two months than first thought -11,000 fewer in March and 38,000 fewer in April. The unemployment rate rose to 8.2 percent from 8.1 percent, the first increase since last June.
Less hiring means fewer Americans have money to spend. That holds down consumer spending, which drives about 70 percent of the economy and helps fuel job growth. And a rising unemployment rate tends to reduce confidence. That can further shrink spending.
Friday's surprisingly bleak jobs report for May followed a spate of disappointing data. Manufacturing activity slowed, an index of home sales fell and consumer confidence tumbled. Mounting troubles in Europe and elsewhere have heightened economists' concerns.
"The latest economic data have been decisively disappointing," Michael Feroli, an economist at JPMorgan Chase, wrote in a client note.
JPMorgan Chase sharply reduced its growth forecast for the July-September quarter to a 2 percent annual rate, down from 3 percent. It cited the weaker US hiring and a likely drop in US exports due to slower growth overseas. It forecasts growth of 2.1 percent for 2012, down from 2.3 percent.
Julia Coronado, an economist at BNP Paribas in New York, said she now expects growth of 2.2 percent this year, down from her previous forecast of 2.4 percent. She also revised downward her estimate of growth in the April-June quarter to 2.2 percent.
"We keep hoping that we're going to turn a corner and move into a stronger phase of recovery, and the door keeps getting slammed shut," Coronado said.
Forecasting firm Macroeconomic Advisers and Swiss bank UBS have also marked down their expectations since Friday's jobs report.
It normally takes about 2.5 percent growth to generate enough hiring just to keep up with population growth.
After months of fitful expansion since the recession ended three years ago, many analysts had expected the economy to begin strengthening.
Last month, the National Association for Business Economics said its latest survey of economists found rising expectations for job gains and housing construction. And in April, the Federal Reserve raised its forecast for growth this year to nearly 2.7 percent, from a January estimate of 2.5 percent.
Now, it looks as if the recovery is stumbling again. The big blow was Friday's jobs report. It said employers added only 69,000 jobs in May, the fewest in a year, and that fewer jobs were added in the previous two months than first thought -11,000 fewer in March and 38,000 fewer in April. The unemployment rate rose to 8.2 percent from 8.1 percent, the first increase since last June.
Less hiring means fewer Americans have money to spend. That holds down consumer spending, which drives about 70 percent of the economy and helps fuel job growth. And a rising unemployment rate tends to reduce confidence. That can further shrink spending.
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