Date of this Version
Business in Nebraska, (67)702, January 2012: 8 pages.
U.S. Macroeconomic Outlook
he U.S. economy remains on a path of sustained, moderate economic recovery. Growth persists despite a stalled U.S. housing sector, recession in Europe and slowing growth in China and much of the developing world. These factors undoubtedly have slowed growth in the U.S. economy, and are a continuing source of uncertainty, but U.S. economic growth has continued just the same. The credit must go to a flexible and agile U.S. private sector. Since the financial crisis began, businesses have continued to improve their balance sheets, invest in productivity, and seek out opportunities in growing sectors of the economy. Households have worked to lower debt. The result is that U.S. households are in position to expand spending, and businesses are in position to expand hiring as demand grows. The result is that the U.S. is now better able to return to its traditional role as an engine of the global economy, meaning that the economy can expand, albeit modestly, despite weakness in Europe and Asia. But, it would be better to have help from Europe and Asia. For example, the declining value of the Euro, and the rising value of a dollar as a safe investment, are hurting U.S. exports. Slower growth in the developing world is also harming U.S. exports. These factors are particularly important for selected regions of the country, like Nebraska, which are dependent on export activity. The net result is that while growth is anticipated for the U.S. economy in 2012, growth may be uneven. Growth may slow in early 2012 as Europe continues to address its debt crisis, and as Asian economies work to accelerate growth. More robust growth will return later in the year.
Of course, another concern is that problems in Europe will do more than simply limit growth. The potential remains that the European debt crisis could lead to another severe recession in Europe, with potential to cause a global recession. This could occur if there is a severe event, such as a default by a large country such as Italy and Spain, or the collapse of a major European bank. The European Central Bank and political leaders in Europe have taken steps to avoid these outcomes, but these steps have been cautious rather than overwhelming and run the risk of proving ineffective.
While the risk of recession remains at heightened levels (at around one in four), the scenario of sustained, moderate growth remains the most likely. What would this scenario look like? The Council’s expectation is that real gross domestic product (GDP) growth will rise from just 2.0% in 2011 to 3.0% in 2012. This growth rate is at trend levels but is below the rapid increases that often occur during the first years of an economic recovery. On a positive note, real GDP is expected to reach a strong growth rate of 3.5% in 2013. Similar patterns are expected for employment. Employment expanded at around a 1% rate in 2011. The rate of growth is expected to expand to 1.2% in 2012 and 1.4% in 2013. With baby-boomers beginning to retire and slow labor force growth, these rates of employment growth should be sufficient to slowly reduce the unemployment rate 2012 and 2013. However, it will take several more years for U.S. employment levels to reach pre-recession levels, or for the unemployment rate to return to its natural rate. With a modest economic recovery, inflation should cool over the next few years, falling from 3.1% in 2011 to 2.3% in 2012 and 2.0% in 2013.
Construction and Mining
Transportation and Utilities
Nonfarm Personal Income
Net Taxable Retail Sales
Our Thanks …
The Bureau of Business Research is grateful for the help of the Nebraska Business Forecast Council. Serving this session were
- Chris Decker, Department of Economics, UNO;
- Tom Doering, Nebraska Department of Economic Development;
- Jason Henderson, Federal Reserve Bank of Kansas City, Omaha Branch;
- Bruce Johnson, Department of Agricultural Economics, UNL;
- Ken Lemke, Nebraska Public Power District;
- Scott Loseke, Nebraska Public Power District;
- Phil Baker, Nebraska Department of Labor;
- Franz Schwarz, Nebraska Department of Revenue;
- Scott Strain, Greater Omaha Chamber of Commerce;
- Eric Thompson, Department of Economics and Bureau of Business Research, UNL