News > Economy
Hope for the economy, but few jobs
Economists, small business owners grow more optimistic, but jobs, inflation picture still muddy.
September 15, 2003: 5:48 PM EDT
By Mark Gongloff, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Economists and small-business owners are increasingly optimistic about the strength of the economy, but they're still uncertain about job growth and inflation, according to two surveys released Monday.

Thirty-five economic forecasters surveyed by the National Association for Business Economics in its quarterly outlook said they expected the economy to grow at a 2.6 percent pace in 2003 and at a 4 percent pace in 2004. That's up from average forecasts of 2.3 percent and 3.6 percent, respectively, last May.

"Our ... panel of forecasters expects this upswing to continue through the remainder of this year and next, as the impacts from the waves of shocks that hit the economy finally subside," Duncan Meldrum, NABE president-elect and chief economist of Air Products and Chemicals Inc., said in a statement.

Meldrum cited rock-bottom interest rates after the Federal Reserve's rate-cutting campaign and tax cuts as helping to boost growth.

Separately, the National Federation of Independent Business released its monthly survey of 544 small-business owners, which found optimism posted its biggest one-month jump since the NFIB began its survey in 1986.

Small businesses -- which create 80 percent of the new jobs in the United States, according to the NFIB -- boosted plans for expansion, inventory investment and hiring.

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But NFIB chief economist William Dunkelberg also noted that, even as the percentage of firms planning to hire has risen in recent months, total employment has continued to fall.

"The 'tone' is terrific but the dollars haven't caught up with the music," Dunkelberg said.

In the NABE survey, though the forecasters expected job growth to start in the next six months, they also doubted the unemployment rate would fall below 5.8 percent in 2004 from 6.1 percent last month.

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The NABE forecasters also cut their outlook for consumer price growth in 2003 (to 2.3 percent from a previous prediction of 2.5 percent) and 2004 (to 1.6 percent from May's 2.2 percent prediction).

With inflation expected to stay low and unemployment expected to stay near the highs reached in the latest recession, the NABE forecasters doubted the Fed would be in any rush to raise short-term interest rates.

Some Fed officials, including Fed Governor Ben Bernanke, have pointed out recently that it will take time for the economy to grow strong enough to take up the "slack" -- i.e., the millions of people who are unemployed, as well as the unused production capacity left over from the 1990s boom.

Fed policy-makers meet Tuesday to discuss the economy and their target for the federal funds rate, the overnight bank lending rate they manipulate to speed up or slow down the economy. They are expected to hold the fed funds rate steady at a 40-year low.  Top of page

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