University experts say the U.S. economy is poised for an
upswing.
America’s economy, which has endured a recession, is
finally showing some signs of recovery and could see a growth in
employment soon, according to the annual spring forecast released
by the University’s Research Seminar in Quantitative
Economics.
In the report, economists Saul Hymans, Joan Crary and Janet
Wolfe predict an increase of nearly 3 million jobs in the next two
years.
“We expect the economy to be strengthening,” Crary
said. “We think that strong productivity growth necessarily
will slow down and in order to produce more, jobs will have to be
added to the economy.”
The researchers predict employment growth of 900,000 jobs this
year and 2 million jobs in 2005. In addition, they claim that
unemployment will continue to decrease, falling below 5 percent
after 2006.
The economists said the dollar is currently weak compared to
international currencies, meaning that exports will increase since
American goods will be cheaper overseas. Improving economic
conditions abroad will allow exports to continually rise, thus
expanding the economy at home.
Despite outsourcing to third world nations, Crary said that the
growth would continue. “I think that this sort of growth is
still possible even if that is true,” she said.
Outsourcing has been happening for a long time but since it is
now affecting the service sector, awareness of it is heightened,
Crary said. Outsourcing had previously affected mostly
industry.
National economic output, measured in terms of real gross
domestic product, is projected to grow by 4.7 percent this year
— the largest increase in 20 years — and 3.8 percent in
2005.
Crary said that the government is currently utilizing
expansionary fiscal policy, meaning increased government spending,
which is causing the economy to grow.
The outcome of the presidential election in November will not
alter the forecast, as changes in fiscal policy are gradual, she
said.
In addition, the forecast for inflation and interest rates is
positive, the report says. Inflation is expected to be low this
year, according to the economists.
The consumer price index, which is a measure of the change in
prices paid by consumers for an assortment of goods, is expected to
rise 1.4 percent compared to a 1.5-percent rise last year.
It is expected to pick up in 2005, increasing to 2.2 percent
next year and 2.6 percent in 2006.
The economists expect the Federal Reserve to use a cautionary,
expansionary monetary policy, further adding to the expansion of
the economy.
The report predicts the Fed will gradually increase the federal
funds rate later this year.
The federal funds rate is the rate at which institutional banks
borrow money from the Federal Reserve.
In addition, the report suggests that energy prices, including
crude oil and gas fuels, will decrease.