'Booming' economy forecast in survey
| • | Job market still lags growth |
By Barbara Hagenbaugh and Barbara Hansen
USA Today
WASHINGTON — Employers soon will add jobs steadily as the economy continues to expand, say economists surveyed by USA Today.
In an optimistic outlook, the 56 economists also predict businesses and consumers will continue to spend more as the unemployment rate falls. Inflation will stay low, they say, letting the Federal Reserve keep interest rates at historic lows a bit longer.
The predictions come as jobs take center stage in the presidential election. Democrats repeatedly note that there are 2 million fewer jobs in the United States since President Bush took office. Bush counters that the economy was declining before the last election and that the job market is poised to take off.
"I consider it a booming economy," says Timothy Rogers, chief economist at Boston-based Briefing.com, a site that provides data and analysis for investors.
Rogers and other economists are most heartened by the big pickup in business spending.
Businesses sent the economy into a recession as they cut spending starting in late 2000. After picking up last year, business investment is expected to increase by double digits each quarter in 2004.
"Business looks really very, very good," Decision Economics President Allen Sinai says, noting that corporate profits are rising rapidly. That means firms can spend on new technology and other improvements.
They also may finally spend on hiring. In the survey conducted March 19-24, 31 percent of the economists said they expect hiring to begin in earnest in the second quarter. More than half expected considerable gains in the second half.
Economists say the economy is improving quickly enough that businesses will no longer be able to meet demand with their existing workforces.
Through new technologies and improved business processes, employers have squeezed more work out of employees without hiring, even though the recession technically ended 2 1/2 years ago. High costs for healthcare and pensions also have led firms to put off hiring.
- More than one-quarter of the economists expect the Fed will begin boosting interest rates during the third quarter; 38 percent say the fourth quarter.
- The economists said the average rate on a 30-year fixed mortgage would not rise above 6 percent until the fourth quarter. Last week's average rate was 5.4 percent, according to Freddie Mac.
