While the economy isn’t expected to boom, the economists are wearing smiley faces because they expect that the economic recovery, which picked up momentum in the second half of last year, will run deep enough to trigger meaningful gains in employment and business spending.
In fact, according to the 54 economists polled by The Wall Street Journal, the nation’s jobless rate could drop to 5.5% by November 2004 (from November 2003’s 5.9%) and could mean more than 1.5 million new jobs in a 12-month period. That compares to last summer’s unemployment rate of 6.4%.
“The economy will be producing a message that employment is growing at a pretty good pace, but not booming,” Richard Rippe, chief economist at Prudential Equity Group Inc. told the Jounral.
Economists say businesses will pick up hiring as a result of continuing to enjoy rising corporate profits and by benefiting from $149 billion in tax cuts during the year. Also, interest rates stay at a 40-year low.
Together, the pundits predicted that real gross domestic product – the broadest measure of economic output – will advance by an annual rate of 4.5% in the first quarter, 4.3% in the second quarter and 4% in the second half of the year. That represents a sharp acceleration from the 2.6% rate that prevailed between the official end of the recession in November 2001 and the beginning of the third quarter of 2003.