|by Paul Davidson and Barbara Hansen, USA TODAY|
Political paralysis in
That's the consensus of economists surveyed by
The across-the-board spending cuts will cause growth to slow in the middle of 2013. But the negative effects will ease by the fourth quarter as the private sector gathers strength, according to the 43 leading economists surveyed
This year, the budget cuts are expected to pare federal spending by
The economy expanded at a 2.5% annual rate in the first quarter. Economists' median estimates project growth is likely to slow to 1.8% in the current quarter and 2.2% in the third quarter.
Monthly job growth, which averaged 206,000 in the first quarter, will average 165,000 in the second quarter and 172,000 in the third quarter, the economists predict.
Many top economists, including Federal Reserve Chairman
Since the labor market hit bottom in early 2010, the economy has grown about 2% annually and monthly job growth has averaged 162,000.
"There are some powerful positive forces to offset" the budget cuts, says
The Federal Reserve's massive bond-buying initiative, he says, has held down long-term interest rates, juicing housing and driving up stock markets. Housing starts likely will total 990,000 this year and about 1.2 million in 2014, according to Standard & Poor's, up from 780,000 in 2012.
O'Sullivan says higher home and stock prices are making consumers feel wealthier so they'll spend more, adding 0.7 percentage point a year to economic growth. Continued job gains, he says, will further bolster spending. And the share of income that Americans are using to pay off debt has fallen to a historic low.
Meanwhile, 81% of the economists surveyed say the European economic slowdown will pose a lesser or unchanged risk to the economy this year vs. 2012.
Obstacles to a faster recovery remain. The economists say the new health care law will trim monthly job additions by 5,000 this year and 10,000 in 2014, as employers hire fewer full-time workers to avoid paying health insurance.
"We're getting a recovery," he says. "It's just a slow recovery."
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