Economists lower growth outlook

The National Association of Business Economists has lowered its growth outlook for the entire U.S. economy, forecasting persistent high unemployment and sluggish growth for the next two years, if not beyond. From the summary:

• Real gross domestic product (GDP) is now expected to advance 2.6 percent in 2010, down from the panel’s May prediction of 3.2 percent. … [M]ost of the markdown reflects worse-than-expected summer results and a dimmed outlook.
• Seventeen percent of survey respondents characterized the expansion as “uneven, dominated by stimulus policies.” That is up from just 5 percent in May. The dominant characterization of the economic “recovery” — held by 37 percent of the NABE Outlook panel — was that of an expansion remaining “subpar as severe wealth losses and onerous debt burdens inhibit spending and lending.”
• Consumer spending is expected to remain modest throughout the forecast horizon due to weak job gains, persistently high unemployment, and negligible growth in household net worth reflecting only small gains in the stock market and home prices. This year’s holiday retail sales are expected to be especially weak, rising only 2.5 percent from last year.

And what’s the problem with low growth? For one, it means more unemployed workers, who do not contribute to economic growth and whose skills fade over time. And the longer that mass of unemployed workers remains unemployed, the harder it is to reintegrate them into the economy.