A group of bank economists believe the country’s economic health is steadily improving and on a path to sustained economic expansion in 2011, according to the Economic Advisory Committee of the American Bankers Association.
“The economy is transitioning from reliance on monetary and fiscal stimulus to a sustained expansion in the private sector. Businesses and consumers are feeling more confident about the economy, and job growth will accelerate as layoffs diminish and small business hiring picks up,” said Stuart G. Hoffman, acting committee chairman and chief economist of PNC Financial Services Group Inc.
The group expects private sector job growth will improve this year and accelerate toward the end of 2011, despite disappointing job creation in 2010. The EAC foresees another 2.1 million new jobs in 2011, well beyond the 1.1 million new jobs the economy added in 2010 and an unemployment rate down close to nine percent by year end.
Consumer and business spending will pick up along with job growth, the EAC said. Strong exports and capital expenditures will also continue to fuel the expansion, even as weak housing and state and local government financial difficulties restrain the pace of expansion. With consumer spending strengthening, along with strong business capital equipment spending, the EAC expects real GDP to grow by 3.3 percent in 2011.
“There are still too many people unemployed and even growth in real GDP of 3.3 percent will take only a moderate bite out of the unemployment rate. Even stronger private-sector employment growth is needed if we are to achieve a self-sustaining economic expansion,” said Hoffman.
The EAC consensus is that while short-term interest rates will remain virtually unchanged, the 10-year Treasury note rate is expected to rise slightly from 3.3 percent to 3.7 percent by year end. The 30 year fixed mortgage rate is expected to rise from 4.8 percent to 5.3 percent by year end.