Americans should get used to a “new normal” of slow economic growth, business economists say.
The median estimate from economists surveyed by the National Association for Business Economics calls for the American economy to grow 2.2 per cent in 2017, up from a forecast 1.6 per cent this year and unchanged from the previous survey in September.
The improved number is still lacklustre by historical standards. U.S. economic growth averaged 3.1 per cent a year from 1948 to 2015, according to the Congressional Research Service. But the business economists say Americans need to get used to slow growth: 80 per cent of those surveyed believe the potential growth rate of the American economy will remain at 2.5 per cent or lower over the next five years.
The economy has been hobbled by an aging work force and weak gains in productivity.
Still, the economists see the risk of a recession as remote; 90 per cent expect the current economic expansion to continue until at least 2018.
They expect employers to add an average 168,000 jobs a month in 2017, down from 180,000 a month so far this year.
Those surveyed also predict the unemployment rate, which fell to a nine-year low 4.6 per cent last month, will average 4.7 per cent in 2017.
A healthy job market means wage growth is likely to outpace inflation this year and next, the economists say. They see consumer prices rising 2.3 per cent next year, almost double the 1.2 per cent increase they expect this year.
Two-fifths of the economists say increased spending on roads, bridges and other infrastructure projects would be the best way to boost economic growth over the next four years; 36 per cent chose tax reform, which usually includes reducing the high official U.S. corporate tax rate in exchange for closing tax loopholes. President-elect Donald Trump has said both infrastructure spending and tax reform will be priorities in his administration.
The economists expect the Federal Reserve to raise interest rates at its meeting next week and to follow up with two more rate hikes next year.
The association surveyed 52 professional economic forecasts from Oct. 31 to Nov. 16. Those who responded before the Nov. 8 election were allowed to send in new estimates after Trump’s unexpected win.