The U.S. employment picture will stay bleak well into next year long after the recession ends, but the worst of the labor market crisis is over, top private economists said on Thursday.
Private economists polled for the Blue Chip Economic Indicators September survey say the unemployment rate will reach at least 10 percent in early 2010 and recede from that level only grudgingly over the second half of the year.
More than 80 percent of the 52 private forecasters polled say the recession that started in December 2007 has ended. They look for gross domestic product to expand at a brisk 3.0 percent annual rate in the third quarter of 2009 and rise 2.4 percent in the fourth quarter.
This compares to growth rates of 2.2 percent and 2.3 percent respectively forecast in the previous survey.
For the year as a whole, the economy is expected to shrink 2.6 percent, the same consensus for July and August. In 2010 the economy will likely expand at a 2.4 percent pace, the survey said.
The latest survey was taken Sept 2-3, just before the release of the government's monthly report on jobs last week. In that report, the Labor Department put the jobless rate at 9.7 percent during August, the highest since June 1983, while employers cut 216,000 jobs, the smallest since August 2008.
The private forecasters said they anticipate only a very gradual improvement in labor market conditions and that the economy will continue to shed jobs through the end of this year though at a diminishing pace.
The Blue Chip forecasters, including economists from major corporations, banks, business associations and consulting firms, say lengthening workweeks will give way to job growth, lifting household incomes and boosting consumer spending.
Firms will respond by beginning to rebuild inventories, accelerating growth in industrial production and eventually encouraging stepped up capital spending as excess capacity is eaten away, the panel of economists said.
The resumption of economic growth in the second half of 2009 is based on restocking of inventories now at record low levels, a modest rebound in consumer spending and an improvement in residential investment, the survey said.
The projected improvement in consumer spending, which accounts for a third of U.S. economic activity, reflected a surge in light vehicle sales in response to the government's cash-for-clunkers program, the survey said.
The government offered consumers up to $4,500 when they traded in gas-guzzling old cars for more fuel efficient new ones, triggering a jump in demand and an increase in production from automakers.
(Reporting by Nancy Waitz, Editing by Chizu Nomiyama)