5 Reasons the Economy Will Be Better in 2012
2011 has been a rough year, but economists think next year will be better
The past year has been full of ups and downs -- mostly downs -- with the nation bracing for the worst with each jobs report, each GDP release, while also yearning to see a glimmer of improvement in the flat-lining U.S. economy.
Unfortunately, more often than not that hope has been dashed, but recently there seems to be a light at the end of the tunnel. Unemployment fell slightly, to 9 percent, last month and
new unemployment insurance claims fell to their lowest level since
The million-dollar question remains whether these improvements can be sustained. According to most economists, the outlook for the U.S. economy is a mixed bag, but there are some definite bright spots.
Here are five reasons the economy could look slightly better in 2012:
1. Moderate economic growth
Economic activity in
To be sure, 2.4 percent is nothing to cheer about -- economists generally say growth upwards of 3 percent indicates a healthy economy -- and there are plenty of challenges ahead for
Still, moderate growth is better than no growth, and heartening for a nation saddled with huge public debt, an
anemic job and housing market, and partisan antics in
>2. No second recession
Along with moderate projections for growth, the odds of
[Read about whether improving GDP figures will quell recession fears.]
"Economists responding to the latest
The report noted the panel's ongoing concern about debt-related issues in
>3. More business spending
One of the major paradoxes over the past several years is how well many businesses are doing in stark contrast to the ugly overall picture of the U.S. economy. In general, companies are flush with cash, and experts predict that profits and stock prices will continue to strengthen.
According to the NABE survey, corporate profits are expected to jump 7 percent in 2011 and 6 percent in 2012. Even with the intense volatility financial markets have seen over the past year, experts expect major indices to continue gaining ground overall through
Due to uncertainty about the economy, many businesses put off investing in infrastructure or upgrading technology. That demand may now return, providing significant support for the ongoing economic recovery, experts say.
4. Improving employment outlook
After remaining virtually frozen for several months, the unemployment rate is inching downward, with the latest outlook for the jobs market buoyed by better-than-expected unemployment insurance claims numbers. Fewer people are seeking unemployment benefits, which could translate into a lower unemployment rate come December.
NABE economists expect unemployment to dip below the 9 percent mark to 8.7 percent, a drop that could spark a renewed sense of confidence in the economy. Jobs gains should increase steadily over the next several months, from 100,000 jobs created on average in the fourth quarter of 2011 to around 130,000 by the end of 2012. Nevertheless, economists still cite unemployment as a major concern for the economy going forward, especially if the rosier predictions don't pan out.
5. Housing starts increase
Although 2011 is shaping up to be the worst year on record for the single-family housing market, the multi-family market, which makes up about one third of the housing market stock, is slowly coming back to life. That could be the prelude to a broader housing market recovery if economists' predictions are right.
Most economists don't see the housing market really gaining steam until 2013, but 2012 will build the fundamentals needed for recovery in 2013. "We see the housing market improving slowly going forward, with single- and multi-family housing starts, new home sales, and existing homes sales all higher in 2012 than in 2011,"
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