When I am trying to figure out what economists are expecting for economic growth, I tend to pay close attention to the economic forecasting survey of 50 to 55 economists conducted monthly by The Wall Street Journal. The results are available on the economic forecasting page of the wsj.com website; look for a link labeled “Charts and Data: Jobs, housing, GDP, more.” The survey asks each respondent for his/her forecast of growth in Gross Domestic Product (GDP, the total value of all goods and services produced in the U.S.), inflation, payroll employment growth over the coming 12 months, June and December unemployment rates during the coming year or year and a half (much less valuable), and much more. The 50-plus forecasts are then averaged. This average is especially valuable because it washes out the optimistic and pessimistic fringes and gives you a good sense of what the typical national economic forecaster is thinking.
The track record of economists in general and this survey in particular has been checkered (to put it delicately) over the past four or five years, but this sort of survey really is the best thing we have to go on, and is always the starting point for my own forecast of local employment. The November survey, which came out last week, predicts positive GDP growth through the end of 2012, but at a pretty modest rate with particular weakness in the first half:
- 4th quarter 2011: 2.5% (annualized)
- 1st quarter 2012: 2.0%
- 2nd quarter 2012: 2.2%
- 3rd quarter 2012: 2.4%
- 4th quarter 2012: 2.5%
We need sustained GDP growth of 3% or more to create significant employment growth, and only about 20% of the respondents expect growth that high. Thus, the economists are not expecting much employment growth next year: an average of 127,000 jobs per month, almost identical to what we saw this year. The unemployment rate will still be above 7% in 2014. While the risk of another recession is seen as lower than it was in October (one-in-four this month vs. one-in-three last month) the odds of a European recession are put at two-in-three on average. This would put a dent in U.S. exports and might create financial risk for our banking system. That is presumably a big reason for the lackluster expectations for 2012.