For the second consecutive year, the United States economy managed to underachieve relative to economists’ unambitious expectations. Indiana University Kelley School of Business economists presented their annual forecast on November 1, and unfortunately expect more of the same in 2013.
And like a year ago, a considerable list of things could adversely upset their expectations, chief among them and most immediate, the “fiscal cliff,” a potential economic growth-killing combination of higher taxes and government spending cuts.
Other ongoing concerns include Europe’s lack of progress in dealing with its sovereign debt problems and China’s transitioning to a slower growth path. The Business Outlook Panel sees these problems as chronic.
The panel expects the national economy overall will expand by about 2.5 percentnext year — if the economy does not go over the fiscal cliff. This will bebetter than the 1.7 percent so far this year, because of somewhat better household spending, improvements in the housing market and less drag from the government sector, but not enough to make much of a dent in unemployment.
They forecast modest employment growth, with the national economy generating about 2 million new jobs. The unemployment rate will remain above 7 percent. Inflation will remain close to 2 percent.
In Indiana, the employment story has been somewhat better than expected. Jerry Conover,director of the Indiana Business Research Center, said the state’s economicrecovery made notable progress in 2012.
“From the peak just before the recession to the trough, Indiana payrolls shrank by 200,000 jobs. Since then, they’ve grown slowly but steadily by 150,000. So far this year, payroll employment is averaging more than 52,000 above last year’s levels, and the growth is accelerating,” Conover said. “This growth rate is comparable to the heady days of the late 1990s.
“This is a more appealing picture than we painted last year for Indiana, and for the year ahead our forecast calls for sustained growth — payroll job growth ofmore than 50,000 jobs in 2013,” he added. “At this rate, we’re still about two years away from our pre-recession employment level.”
Real personal incomes in Indiana will rise a bit less than 2 percent in 2013, with per capita incomes growing by about $1,500. The state’s overall economic output will grow by about 2.3 percent, comparable to the national rate.