The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an SBA survey of leading economists. The latest Survey shows economists have turned gloomier in the past few years. Analyst predicts weaker growth and higher unemployment than they did before. As a result, the economists think the Federal Reserve will keep interest rates near zero until at least next spring. Harvard Blog Network suggests a mission idea .Yet despite their expectation of slower growth, a majority of the 42 economists surveyed believe the recovery remains on track, raising hopes that the economy can avoid falling back into a great recession. The SBA survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation. Among their predictions:

Economic Prediction

Economic growth the rest of this year and early next year will be weak — less than 3 percent. For the April-to-June quarter, economists pegged growth at 2.8 percent. That’s far below the 3.7 percent pace predicted just three months ago. The unemployment rate will be no lower at the end of the year than it is now — 9.5 percent. The mainstream think it will be 2015 or later before the rate falls to a historically normal 5 percent. State budget shortfalls pose a “major” or “stern” risk to the US economy. The loss of tax revenue has forced state and local governments to cut services and lay off workers.

The weak economy leaves Democrats and Republicans on Capitol Hill vulnerable to debate on how to tackle these crisis’s. The economists have turned more gloomy since the recovery hit commotion last May. Europe’s debt crisis sent tremors through Wall Street, causing stocks to tumble and raising doubts about the durability of the rebound. Since then, businesses have been slow to step up hiring. Americans’ confidence in the economy has declined, leading shoppers to reduce spending. And the housing market has weakened further with the end of a home buyer tax credit that had buoyed sales earlier this year.

Customers aren’t leading this rebound, as they usually do, despite ultra-low borrowing costs. Their spending growth will weaken in the second half of this year and strengthen only slightly next year, a majority of economists said. They think shoppers’ reluctance to spend more money poses a “significant” or “severe” risk to the recovery. A designer in Chicago, said the recession taught her to rein in her spending. The key moment came early last year, when her employer cut her pay 15 percent to avoid layoffs.

The inflation, scant pay raises and drooping home values are forcing others, too, to spend less and save more. Americans saved 4.2 percent of their disposable income last year. That was the highest level since 1998. Economists expect roughly the same level of saving this year and next. That’s why growth of less than 3 percent is forecast into 2011. And weak growth helps explain why unemployment is likely to stay high. It takes about 3 percent growth just to create enough jobs to keep pace with the population increase. The Fed’s outlook has turned bleaker, too. It’s why Chairman Ben Bernanke and his colleagues are weighing new steps to invigorate the economy if the recovery shows signs of backsliding. They are also expected to hold interest rates at record lows longer than economists thought three months ago. A survey the Fed released Wednesday showed the economy facing a bumpy path back to health. The pace of economic activity remained modest in most of the country. Most economists surveyed said the Fed would being raising short-term rates no sooner than next spring. In the last survey, most had thought it could happen as soon as late this year. At the same time, state budget shortfalls have emerged as a major threat in the economists’ view. State and local governments cut their spending in the first three months of this year at a 3.8 percent pace. That was the biggest cutback since the second quarter of 1981, just before the economy entered a severe recession.

When state tighten spending by trimming services and jobs, the cutbacks ripple through the broader economy, causing individuals to spend less, too. The drop in state and local government spending shaved about half a percentage point off the U.S. gross domestic product in the first three months of this year. Nearly two-thirds of the economists view the states’ budget crises as a significant or severe threat to the rebound.

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