University of Michigan economists say U.S. growth won't accelerate until 2012; employment expected to increase in every quarter through 2012 but will remain below the 2008 peak
November 18, 2010
– In a good sign for a resurging General Motors, University of Michigan economists are forecasting a climb in motor vehicle sales over the next two years that should help bolster automakers' fortunes.
But don't look for a strong economic surge just yet. The nation's recovery will remain sluggish next year and won't really accelerate until 2012, University of Michigan economists say in their annual national forecast, which they released Thursday.
"Employment is expected to increase in every quarter of the forecast period," but the increases will be small enough that the number of jobs will stay below their 2008 peak through the end of 2012, economist Joan Crary says in an accompanying news release.
After recording a loss of 700,000 jobs this year, the country should add 1.2 million jobs in 2011 and 2 million in 2012, dropping the unemployment rate to 9.3 percent by the end of that period, according to the forecast. The nation lost 8 million jobs between late 2007 and late 2009 and has a long way to go to recoup those losses.
The forecast does point out that the economy is headed in the right direction, and that some of the uptick will come from better times in the auto industry as consumers head into foreign and domestic dealer showrooms for new vehicles.
GM stock began trading on Wall Street again Thursday as the Detroit-based automaker took steps to repay the federal loan that helped it emerge from bankruptcy after the company stumbled when motor vehicle sales plunged to 40-year lows. The company reported earning $2 billion in the third quarter and is taking steps to rebuild its market share, which last year was below 20 percent.
Light vehicle sales are expected to climb from 11.5 million units this year to 12.7 million in 2011 and 14.8 million in 2012, according to the forecast. That's still well below the peak of 17.3 million in 2000 and the more than 16 million vehicles sold through 2007, but a decided improvement over the 10.4 million vehicles sold in 2009.
Crary, and colleagues Daniil Manaenkov and Stanley Sedo, predict that housing starts will improve through 2012, with the number of new single homes and multi-tenant units rising from 605,000 this year to 807,000 in 2011 and 1.13 million in 2012.
They expect sales of existing homes to increase the next two years, from this year's low of 4.27 million units to 4.78 million in 2012. But they also say home prices are likely to drop 2.6 percent in 2011 before rising 1.2 percent in 2012.
Consumers should be helped, however, by low interest and inflation rates. The forecast calls for inflation to stay below 2 percent over the next two years and for conventional mortgage rates to remain flat at 4.3 percent over that period.
The university releases its Michigan forecast on Friday.
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