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Economists: Economy Recovering Slower than Expected

{ Posted on Jul 29 2010 by Marcus Alston }

The Associated Press reports that economists predict that the economic recovery of the United States will continue to improve, but at a slow pace well into 2011.  The cause, according to an Associated Press survey of leading economists, is attributed to us and our employers—consumers are reluctant to spend and employers are reluctant to hire.

The quarterly survey represents a more negative picture than the previous quarter.  Economists predict weaker growth and higher unemployment than they did the previous quarter.  On the good side, these same economists expect the Federal Reserve will keep interest rates near zero until at least spring 2011 so it should be a good time to refinance or take out a new loan.

Also on the positive side is that a majority of the 42 economists surveyed believe the recovery remains on track.  The Associated Press survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation.

In a nutshell, the survey predicts for the rest of 2010 and 2011 that economic growth will be weak (less than 3%), the unemployment rate will continue at or above 9.5%, and that state budget short falls which have caused states to trim their work force and spending, pose a “significant” or “severe” risk to the national economy.  This type of cutback by states historically has led to a negative impact on the broader economy by causing individuals to spend less.

Consumers are tightening their belts, planning for a “rainy” day, and hoping for a better economy and job opportunities.  They no longer want to “live paycheck to paycheck”. They are acting more frugal, exercising a saving and miser mentality, and reducing debt.  Consumers are scared.

In the U.S., consumers saved 4.2 percent of their disposable income last year. That was the highest level since 1998. Economists predict similar levels for 2011 and 2012.  Less spending means less hiring and this in turn impacts the growth of the economy which is expected to be slow at less than 3%.

Tighten your belts folks and keep on reading this blog for helpful hints on how to weather this economic storm.  Have any tips on how to make ends meet in this poor economy?  Please write a comment below.

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One Response to “Economists: Economy Recovering Slower than Expected”

  1. A+ would read again

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