While economists have made it no secret that the unemployment rate will likely rise well into 2010, a new survey from Bloomberg suggests that they may also be worried about what effect it may have on the economy as the country wades through the coming year on its way to recovery.
Drawing onthe 35 percent drop in car sales in August following the end of the Cash for Clunkers, the survey – which polled 57 economists between October 1 and October 8 and took their median forecasts – expressed worry that the economy would still be largely dependent on government funding in order for profits to occur in 2010.
Despite the economists’ forecasts that household spending would increase by 1.5 percent in Q1 2010 before increasing to 1.8 percent in Q2 2010, they also predicted that unemployment would exceed more conservative estimate and exceed 10 percent in Q1 2010 before averaging 9.9 percent for the year.
"You just can’t see a lot of strength on the consumer side given how battered income is from job losses and weak hourly wage growth," David Greenlaw, the chief fixed-income economist at Morgan Stanley & Co., told Bloomberg. "We’ve got a gradual recovery in the overall economy, but it’s not vigorous enough to knock down the unemployment rate by much."
The forecasts were released the same day that the Department of Commerce revealed that a weak dollar and an improving worldwide economy had resulted in a trade deficit of $30.7 billion in August, a $1.2 billion drop from July’s revised figures.