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September 17, 2013

AP survey: Sluggish global economic recovery ahead

(Continued)

WASHINGTON —

The AP survey collected the views of private, corporate and academic economists on a range of issues. Among their views:

— The Fed will start reducing its $85 billion in monthly bond purchases after its latest policy meeting ends Wednesday. The initial cut in purchases will be small — $10 billion a month. The Fed's bond purchases have been intended to keep long-term loan rates low to induce people to borrow and spend. Though U.S. hiring and growth remain soft, some Fed officials don't think the bond purchases are doing much good anymore.

— "Tapering," as the Fed's expected pullback in bond purchases has come to be known, won't significantly disrupt the U.S. stock and bond markets. "That's because it's been so well-telegraphed," said Jerry Webman, chief economist at OppenheimerFunds. Investors have already driven up the yield on the 10-year Treasury bond about 1.2 percentage points beyond its level in late May, when Chairman Ben Bernanke first suggested that the Fed could slow its purchases by year's end.

— The biggest obstacles to faster U.S. growth vary — from tepid job and pay growth to the lingering squeeze from a Social Security tax increase and government spending cuts to doubts about whether Congress will raise the government's borrowing cap. If the cap isn't raised, the United States could default on its debt by mid-October. That would risk a downgrade of U.S. credit.

— The U.S. unemployment rate won't return to a range associated with a healthy economy — roughly 5 percent to 6 percent — before 2015 and perhaps not until 2016 or later. The rate is now 7.3 percent. It rose as high as 10 percent during the recession and has been falling steadily. But the rate has been falling, in large part, for a discouraging reason: More people have stopped looking for work. Once people without a job stop looking for one, the government no longer counts them as unemployed.

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